ETFs To Watch If Trump Makes It To White House

As the prime election day is breathing on your neck, the gap between Republican and Democrat presidential candidates is narrowing, though Clinton is still ahead. Polls in favor of Clinton and Trump are 45.3% and 43% respectively, as per the national polling average published on nytimes.

Early last week, the situation turned sour for Clinton with the FBI probing into her emails. In fact, as of November 3, polls showed that both candidates have about 45% chances of winning. (read: 5 ETFs to Buy as Election Uncertainty Looms).

But now, with the FBI clearing Clinton off allegations, the wind is again in her favor. But there is a section that still believes Trump’s recent popularity is not just because of the FBI probe. It definitely has something to do with Trump's inherent policy formulation.

In such a scenario, an investing case should be worked out in case Trump wins the race to the White House.

Short-Term Impact

Bullion Bulls

The initial impact will be a safe haven rally. Historically, Democrats are good for stocks while Republicans are less beneficial. And so far, what Trump has delivered in speeches is mostly “inward looking”, as per ABN Amro. As per the research organization, Trump’s policies may hinder U.S. growth and cause an upheaval in the U.S. market pushing the safe-resort gold and the ETF SPDR Gold Shares (NYSE:GLD) (V:GLD) higher (read: Does The Donald Hold The Trump Card for Gold ETFs?).

Trump may push for currency wars against the key trading partners of the U.S., as per the source. Agreed, his mode of war would be via tariffs, but a lower greenback route can’t be completely ruled out. All these will likely keep the greenback’s value at check and gold prices might soar as the metal is priced in U.S. dollar.

Bond Yield to Fall?

Thanks to a flight to safety, yields on long-term U.S. Treasury bonds should come down and bond prices should rise. iShares 20+ Year Treasury Bond (NASDAQ:TLT) (V:TLT) should thus gain just after the election results if Trump wins, though the impact is likely to be short-lived.

Moreover, Trump is ‘a low interest rate person’. Concerned about the U.S. economy’s $19 trillion debt, Trump wants to keep interest rate low so that the country does not have to end up paying much higher interest.

U.S. Stocks Slump

Now these assets are already guilty of overvaluation concerns and Trump’s victory would nothing but trigger the sell-off. The S&P 500 and Nasdaq are already on the nine-day losing streak ignoring a better Q3 earnings season. Things may turn worse if the republican candidate takes charge of White House. Barclays (LON:BARC) sees a 13% plunge in the S&P 500 on Trump’s victory. This puts SPDR S&P 500 ETF (NYSE:SPY) (AX:SPY) in focus.

Japanese Stocks to Slide?

If the greenback slips, yen would gain strength and Japanese equities may succumb to a further slowdown. iShares MSCI Japan EWJ may thus be hard hit.

Long-Term Impact

Infrastructure Gains

Donald Trump is also in favor of beefing up public spending by hundreds of billions of dollars, in spite of the fact that republicans intend to check government spending. In fact, his spending plans are deemed to be much higher than Clinton. Utilities ETFs like First Trust Utilities AlphaDEX Fund FXU are likely to benefit from this trend.

Encouraging Fossil Fuels

Taking a completely difference stance from president Obama, Trump is ready to push for more fossil fuel generation, be it from crude oil, natural gas or coal. This in turn may hit low carbon and clean ETFs like iShares MSCI ACWI Low Carbon Target ETF CRBN, while VanEck Vectors Coal ETF KOL may gain ahead.

Bond Yields to Rise?

As per the source, though his win will likely lower bond yields initially, his huge tax cuts and infrastructure-spending plans should push the yield higher over the longer run. These initiatives would eventually boost inflation and boost demand for inflation-protected bond ETFs like iShares TIPS Bond ETF (BK:TIP) .

Upheaval in Currency Market

Since Trump does not support NAFTA (North American Free Trade Agreement) – which removes a major share of tariff on products traded between the U.S., Mexico and Canada – and eventually terminates it fully – currencies of Canada and Mexico have come into question. JPMorgan (NYSE:JPM) sees “one-day slides of 8 percent for the peso and 5 percent for the Canadian dollar.” This puts iShares MSCI Mexico Capped EWW and iShares MSCI Canada (AX:EWC) in focus.

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