Donald Trump won the U.S. presidential race in an election that also handed Republicans a sweep of the Senate and the House—an outcome few expected, and one that should guide the regulatory landscape.
In this environment, which many are characterizing this morning as a period of uncertainty, because Trump represents a departure from current policies in place, there are a few pockets of the market that should do well.
Taking a few clues from early market action this morning, consider these ETFs for a Trump victory:
Gold prices have already begun rallying on the heels of the surprising Trump victory. Overnight, following the election, gold futures surged some 2.6% to $1,310 an ounce, according to MarketWatch, staging the biggest rally since mid-June. Trading volume was also near record levels, roughly three times the daily average this year.
That was the yellow metal’s steepest gain since the Brexit vote, and it, too, is pointing to investor demand for a safe haven in the face of a Trump presidency. As Dennis Gartman put it this morning on CNBC's Squawk Box, "I think the world was not prepared for Mr. Trump to win this, so money is fleeing to safer havens—it's going to gold, it's going to the Japanese yen."
GLD is the largest ETF to invest directly in physical gold and gold-related ETFs in general. It has some $40 billion in assets. Year-to-date, the ETF is up nearly 22%.
Trump has vowed to spend some $500 billion on infrastructure projects, including repairing and expanding roads and bridges, modernizing the airspace system, connecting all Americans to the internet, and more.
The $1.1 billion IGF invests in companies involved with infrastructure, including industrial names in the transportation industry. The fund is the biggest and oldest in this segment, and it’s also global in scope. The U.S. represents about 40% of the portfolio’s country weightings.
A lot has been speculated about Trump’s connection and Vladimir Putin during the past 18 months. A note on the official Kremlin website this morning said that Putin congratulated Trump on his victory, and said “he hopes for work together to lift Russian-U.S. relations out of the current crisis, resolve issues on the international agenda, look for effective responses to global security challenges.”
For his part, during the campaign phase, Trump suggested a new approach to Russia was necessary. In a speech last April in Washington D.C., the Wall Street Journal reported Trump as saying, “I believe an easing of tensions, and improved relations with Russia—from a position of strength only—is possible, absolutely possible. Some say the Russians won’t be reasonable. I intend to find out.”
RSX is the oldest Russia-focused ETF in the market, with $1.7 billion in assets. The fund tracks a market-cap-weighted and -selected index of Russian companies, and is up nearly 27% year-to-date.
So far, 2016 had not been a good year for biotech ETFs thanks in part to criticism by Hillary Clinton of the industry’s pricing practices. Under Trump, a looser grip on regulations—an assumption, of course—could mean a boon for the industry.
At the opening, IBB shot up higher this morning, tallying on gains of nearly 7% right off the bat. IBB is one of the largest biotech ETFs, with $6.8 billion in assets, and a fund that has been around for 15 years. It tracks a market-cap-weighted index of biotechnology and pharmaceutical companies listed on the Nasdaq.
The fund is still deeply in the red year-to-date, but the chart below shows the impressive spike following the election outcome:
Throughout the campaign, there was much debate about whether China was “dumping” steel into the U.S. market, hurting the U.S. industry.
Markets are looking for Trump to take measures to protect the U.S. steel industry, such as possibly implementing higher trade tariffs. Trump has offered plenty of rhetoric on his intent to boost local industries and protect U.S. workers to “make America great again.”
SLX, the only steel ETF on the market today, and a relatively small one, with $131 million in assets, opened sharply higher this morning, rallying more than 4.5% in early trade on the heels of the election. The fund is now up 86% year-to-date.
Charts courtesy of StockCharts.com
Contact Cinthia Murphy at [email protected]