Plenty of asset classes and sectors are taking turns in the limelight as presidential election plays. Healthcare and biotechnology stocks and exchange-traded funds have already endured some punishment at the hands of Democratic nominee Hillary Clinton, while some on Wall Street believe everything but gold will languish if Republican nominee Donald Trump wins the White House.
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Industries, ETFs And The Election
There are some industries with relevant ETFs that are expected to perform well regardless of which party claims the White House in November. Aerospace and defense is, and due to the fact U.S. infrastructure is an embarrassment, infrastructure ETFs make for compelling post-election ideas as well.
The Case For IGF
There are reasons to be considering ETFs such as the iShares S&P Global Infrastructure Index(IGF). For instance, data suggest it should be spending more time the in the election year spotlight. After all, U.S. infrastructure is shabby. Earlier this year, the Center on Budget and Policy Priorities said infrastructure spending in the world's largest economy fell to a 30-year low.
Depending on the type of project, infrastructure has the potential to create a positive multiplier effect on markets from an economic perspective. In the short term, infrastructure projects could provide private sector growth and jobs, thus potentially leading to increased tax revenues and a boost in consumer confidence and consumption, said BlackRock in a recent note.
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Perhaps pricing in increased infrastructure spending post-election in the U.S. and abroad, IGF is up more than 18 percent year-to-date. While government spending is often associated a Democratic trait, IGF investors might fare better if Trump wins. Simple math confirms as much. Clinton's $275 billion infrastructure spending proposal is puny compared to the $1 trillion plan proposed by Trump.
Still, investors should note U.S. stocks represent just under 40 percent of IGF's weight. Canada, Spain and Australia combine for over 26 percent of the ETF's lineup indicating that, among others, those countries will need to contribute to drive IGF higher.
In short, a combination of factors have created a compelling case for infrastructure investment. Should these scenarios unfold, equity sectors and industries related to infrastructure activities like industrials or transportation in the U.S. specifically, may stand to benefit, added BlackRock.
Three industry groups are represented in IGF with transportation and utilities names combining for over three-quarter of the ETF's weight. Energy stocks make up the rest.
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