5 ETF Losers From Trump Win

As surprising as Donald Trump’s upset victory in the presidential election has been, the reaction in financial markets has been just as surprising. Down nearly 5% at one point overnight, S&P 500 futures rebounded to trade higher shortly after U.S. stock markets officially opened at 9:30 a.m. ET.

Some analysts believe stocks will still decline from here, at least until it becomes clearer how President-elect Trump’s policies will impact the U.S. economy. Other asset classes could get hit too. Here are five ETFs that could perform poorly following the election of Trump to the White House.

iShares 20+ Year Treasury Bond ETF (TLT)

Perhaps the most surprising loser of Trump’s victory is TLT, currently down 2.5% on Wednesday. Many people believed that Treasurys, widely considered a safe haven, would get a boost from the uncertainty of a Trump victory. Instead, bond prices have fallen in anticipation of increased spending under a Trump administration, pushing the 10-year Treasury yield to just under 2%.

The president-elect has promised to increase spending by trillions of dollars on things including infrastructure and defense. If that spending is funded through borrowing, that may continue to depress bond prices, while lifting interest rates. 

iShares MSCI Mexico Capped ETF (EWW)

Many of Trump’s earliest and most prominent campaign pledges were related to Mexico. He said he would build a wall and make Mexico pay for it and that he would renegotiate trade deals with the country. Currently, trade between the U.S. and Mexico falls under the North American Free Trade Agreement, which Trump is against.

A rise in trade barriers between the U.S. and Mexico could have detrimental effects on the Mexican economy, pushing down funds such as EWW. As of this writing, EWW was down 9% in the aftermath of the election.
 

Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR)

Similar to the situation in Mexico, Trump has railed against the “bad deals” that the U.S. has with China. Though the two countries are large trading partners, it’s sometimes been a contentious relationship, with the U.S. accusing China of dumping products like steel and aluminum to undercut domestic manufacturers.

Trump has said he would level the playing field with China, even if it requires instituting tariffs. He has also claimed that China is a currency manipulator that gains a competitive advantage by undervaluing its currency. He has threatened to take action on that front as well.

In either case, China ETFs like ASHR, down 0.2% so far today, may get dragged lower if the U.S. enters a trade war with China.

SPDR S&P International Energy Sector ETF (IPW)

Trump is a big supporter of the U.S. fossil fuel industry, including oil, natural gas and coal. His energy plan includes the promise to “open onshore and offshore leasing on federal lands, eliminate the moratorium on coal leasing, and open shale energy deposits.”

That suggests that U.S. oil production under a Trump administration is more likely to increase. That may be good for certain U.S. energy companies that end up boosting their output, but may also weigh on oil prices themselves.

The biggest losers in this scenario are likely to be international energy companies with relatively little exposure to the U.S. One ETF that holds these types of companies is IPW, down about 1% so far today.

Guggenheim Solar ETF (TAN)
Renewable energy ETFs such as TAN are down nearly 5% today, and may continue to decline if Trump follows through on his vow to cancel the Paris climate agreement to limit greenhouse gas emissions.

Trump, who has referred in the past to global warming as a hoax, is unlikely to favor the renewable energy industry over the fossil fuel industry. In addition, with Republicans now controlling the Senate and House, tax subsidies for the renewable energy industry are in jeopardy.

Contact Sumit Roy at [email protected]