With less than a week to go until the fateful US presidential elections, investors are on tenterhooks, as the election results could change the course of the global markets dramatically. Donald Trump has surprised the world with a shocking comeback after it looked like he was toast following the final debate and criticism over some of his comments regarding women. However, after FBI director James Comey announced reopening the investigation into Hillary Clinton’s email scandal, Trump has staged a comeback in the polls.
The latest poll from ABC News and the Washington Post shows that Trump has a one-point lead over Hillary. A change in the Oval Office influences the stock market heavily due to policy changes enacted by the leader of the free world. In this article, we’ll take a look at the ETFs which are likely to perform well should Donald Trump, against all odds, become the President of the United States of America.
Through extensive research that covered the portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details).
Defense ETFs Likely to Flourish Under Trump
Donald Trump has clearly communicated his intentions to increase military buildup both at home and abroad, which will favor Defense and Aerospace industry ETFs, including the iShares Dow Jones US Aerospace & Def.ETF (NYSEARCA:ITA) and the PowerShares Aerospace & Defense (ETF) (NYSEARCA:PPA). Mr. Trump has plans to initiate a strong border patrol on the U.S.-Mexican border, initiate land operations in the Middle East, and increase spending to revamp the United States’ defense infrastructure. In a speech at the Union League of Philadelphia in September, Trump vowed to abolish the defense budget cuts enacted in 2013. Without those limitations, analysts think the defense budget could go up by $500 billion over the next ten years. The presidential candidate also wants to modernize the country’s next-generation warfare program, add 90,000 new troops, and build 75 new warships.
iShares Dow Jones US Aerospace & Def.ETF (NYSEARCA:ITA), a Pennsylvania-based $876 million ETF, tracks the Dow Jones U.S. Select Aerospace & Defense Index, which consists of all the major companies involved in the manufacturing of defense equipment, including Boeing Co (NYSE:BA), Lockheed Martin Corporation (NYSE:LMT), and Lockheed Martin Corporation (NYSE:LMT). The iShares Dow Jones US Aerospace is up by over 8.6% year-to-date.
The PowerShares Aerospace & Defense (ETF) (NYSEARCA:PPA) is an Illinois-based ETF which tracks the SPADE Defense Index. The Fund normally invests at least 90% of its total assets in common stocks that comprise the Index. The ETF is up by over 6% year-to-date. Boeing and Lockheed Martin also feature prominently in this ETF.
On the next page, we’ll discuss some other ETFs which have huge growth potential under a Donald Trump presidency.