Published February 13, 2013
On Tuesday night, President Barrack Obama will deliver the first State of the Union speech of his second term. State of the Union addresses are often long on great oration, but short on rhetoric worth remembering beyond a couple of days after the speech.
In recent memory, the U.S. has had few great orators in the Oval Office. Ronald Reagan and Bill Clinton top the list, but the reality is few, if any Americans run around repeating quotes from State of the Union addresses.
For investors, the quality of the oration is not nearly as important as the substance. With the intersection of Capitol Hill and Wall Street still too close for comfort in the eyes of some, President Obama's speech will be worth parsing over to see which sectors could be in play the rest of this week.
Without the benefit of a crystal ball or an advance copy of the speech, some educated ETF guesses are being made here, but a couple are obvious candidates for post-State of the Union action.
PowerShares Build America Bond Portfolio (BAB) As some income investors no doubt remember, the PowerShares Build America Bond Portfolio and other Build America Bond funds wound up being one sub-segment of the ETF market caught up in the fiscal cliff debate.
These bonds, authorized under the 2009 American Recovery and Reinvestment Act, are now potentially vulnerable to sequestration, which lead to automatic budget cuts. President Obama wants Build America Bonds to be a permanent fixture, as do some members of his party.
Some Republicans do not feel the same way. In other words, it is not out of the realm of possibility that Obama's SOTU address will feature at least one plug that could benefit BAB and related ETFs.
Guggenheim Solar (TAN) The Guggenheim Solar ETF is in rally mode Tuesday, surging nearly four percent. TAN's bullishness is the result of China again doing whatever it can to support its ailing solar firms, many of which populate TAN and speculation that some U.S. solar companies are considering conversions to MLPs or REITs.
As Barron's noted, the latter issue is perhaps more fiction than reality. However, what is reality is President Obama's long-standing support, controversial as it may be, of solar power. Knowing that he does not have to seek election again, Obama can push an alternative energy agenda in his second term.
Any language to that effect could mean a near-term pop for TAN and the rival Market Vectors Solar Energy ETF (KWT).
iShares Dow Jones US Aerospace & Defense Index Fund (ITA) ITA and other aerospace ETFs have held up well in what has been a challenging environment for the sector. First, there was the fiscal cliff debate, at which defense spending was front-and-center.
That was followed by Boeing's (BA) Dreamliner woes. Once again, ITA and other aerospace ETFs find themselves at the center of political wheeling and dealing. Negative headlines pertaining to the sequestration issue will undoubtedly hit some ITA holdings, including Boeing, Lockheed Martin (LMT) and Raytheon (RTN).
The PowerShares Aerospace & Defense Portfolio (PPA) features many of the same holdings as ITA, meaning both ETFs will be worth keeping an eye on tomorrow.
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