In an upset of epic proportions, Republican nominee Donald Trump is now president elect after defeating Democratic rival Hillary Clinton.
Volatility And Victory
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As Election Day turned to Election Night with the contest shaping up to be closer than recent polling data suggested, global financial markets tumbled, confirming that a broad range of asset classes would react negatively to a Trump victory. Leading up to the election, there was no shortage of speculation assets, regions and sectors that could bemoan a Trump victory.
Markets reflected as much Tuesday night, with U.S. equity futures tumbling, Asian markets getting crushed and the dollar sliding. Dollar weakness reminds investors gold and exchange-traded funds such as the SPDR Gold Trust (ETF) (NYSE:GLD) offer upside potential in the coming days.
Gold's Bull Case
Adding to the bull case for gold is the potential for more dollar erosion as investors and traders now come to grips with the notion that bets may now be off for the Federal Reserve boosting interest rates in December. Investors have plunked down more than $40 million into the PowerShares DB US Dollar Index Bullish Fund (NYSE:UUP), the U.S. Dollar Index-tracking ETF, over the past month, according to PowerShares data.
However, with a rate hike most likely no longer imminent, UUP's bearish cousin, the PowerShares DB US $ Index (NYSE:UDN) could be poised to benefit if the greenback enters a prolonged slump.
Keeping with the theme of the Fed not hiking rates in the wake of Trump's victory, obvious fixed-income ETF beneficiaries include long-dated bond funds such as the ProShares UltraShort Lehman 20+ Yr(ETF) (NYSE:TBT).
Investors with a taste more rate-sensitive bond ETF may want to consider the PIMCO 25 Yr Zro Cupn US Ty Inx Fd ETF (NYSE:ZROZ) and the Vanguard Extended Duration ETF (NYSE:EDV).
Highly sensitive to interest rates, zero-coupon bonds often sell at a sizable discount to face value because buyers do not get a steady stream of income as they do with traditional bonds. As zero-coupon Treasurys get close to maturity, their values increase with buy-and-hold investors getting the full value of the bond when it matures, according to ETF Trends.
Trump's victory may be handcuffing the Fed when it comes to raising rates this year, in turn increasing the allure of ETFs like EDV and ZROZ.
An industry ETF to consider is the Market Vectors-Coal ETF (NYSE:KOL). KOL has, quite miraculously, more than doubled this year even as Clinton looked strong and levied harsh rhetoric against the coal industry. That rhetoric proved costly as Trump carried most of the major coal-producing states, including becoming the first Republican since 1988 to win Pennsylvania.
Perhaps KOL was a legitimate Trump indicator that few acknowledged. It will be interesting to see if the coal ETF can keep rising now that its preferred candidate is the next U.S. president.
2016 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.