Trump Passes Order To Fix U.S. Infrastructure: ETFs In Focus

President Donald Trump’s most recent activity involves passing an executive order aimed at reducing restrictions and regulatory burden in order to speed up infrastructure projects.

This revokes an Obama-era rule aimed at imposing strict reviews of projects in flood-prone areas in order to battle sea-level rise and flooding. The Obama-era rule required scientific factoring of how infrastructure projects would withstand floods and rise in sea level. Eliminating this rule means focusing on short-term gains and ignoring long-term outlook.

Although Trump has promised not to pass projects that might pose a threat to the environment, this order should not be a shocker given his take on climate change.

In a move toward his vow of spending $1 trillion on public and private infrastructure, Trump’s most recent order would speed approvals for roads, bridges, highways etc. Trump’s administration proposes $200 billion in government funding over a period of 10 years, as he works towards making his investment plan a reality.

Trump has repeatedly compared U.S. infrastructure to that of a third-world country. He also added that the defeat of the healthcare bill will not be a drain on his confidence for passing the infrastructure policies.

Many environmentalists and flood experts have criticized this order, as it is not only a threat to the environment, but also might be a drag on taxpayer money relating to flood related damage control. Per an article on voanews.com, an estimated $260 billion has been spent on flood control between 1980 and 2013.

However, the order is expected to bode well for companies in the Materials sector. These companies can expect a surge in demand as infrastructure projects expedite and spending increases (read: ETF Asset Report : Developed Markets Rule in Q2).

Let us now discuss a few ETFs focused on providing exposure to U.S. equities in the materials sector (see all Materials ETFs here)

Materials Select Sector SPDR Fund XLB

This fund is one of the most popular ETFs tracking the U.S. materials sector.

It has AUM of $3.5 billion and charges a fee of 14 basis points a year. From a sector look, the fund has high exposure to Chemicals, Containers & Packaging and Metals & Mining with 73.71%, 12.02% and 8.94% allocation, respectively (as of June 30, 2017). The fund’s top three holdings are Dow Chemical (NYSE:DOW) , E. I. du Pont de Nemours and Company (NYSE:DD) and Monsanto Co. (NYSE:MON) with 11.88%, 11.74% and 8.52% allocation, respectively (as of August 15, 2017). The fund has returned 11.06% in the last one year and 8% year to date (as of August 15, 2017). It currently has a Zacks ETF Rank 3 (Hold) with a Medium risk outlook (read: 3 Quotes For Investing During Uncertain Times).

Vanguard Materials ETF VAW

This fund is a low-cost ETF that seeks to provide exposure to U.S. materials companies.

It has AUM of $2.3 billion and charges a fee of 10 basis points a year. From a sector look, the fund has high exposure to Specialty Chemicals, Diversified Chemicals and Fertilizers & Agricultural Chemicals with 21.90%, 20.60% and 9.60% allocation, respectively (as of July 31, 2017). The fund’s top three holdings are Dow Chemical, E. I. du Pont de Nemours and Company and Monsanto Co. with 9.1%, 8.3% and 6.0% allocation, respectively (as of July 31, 2017). The fund has returned 12.60% in the last one year and 7.26% year to date (as of August 15, 2017). It currently has a Zacks ETF Rank 3 with a Medium risk outlook.

iShares U.S. Basic Materials ETF IYM

This fund is a popular ETF that seeks to provide exposure to the U.S. materials sector.

It has AUM of $715.28 million billion and charges a fee of 44 basis points a year. From a sector look, the fund has high exposure to Diversified Chemicals, Specialty Chemicals and Fertilizers & Agricultural Chemicals with 27.80%, 23.35% and 13.43% allocation, respectively (as of August 14, 2017). The fund’s top three holdings are Dow Chemical, E. I. du Pont de Nemours and Company and Monsanto Co. with 11.81%, 11.66% and 8.52% allocation, respectively (as of August 14, 2017). The fund has returned 13.34% in the last one year and 8.19% year to date (as of August 15, 2017). It currently has a Zacks ETF Rank 3 with a High risk outlook.

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