US Wahlen 2024

Here’s a look at how some of the ETF sectors performed under Trump’s presidency between 2016 and 2020, and what could make 2024 different if he heads to a second win.

Energy-related ETFs

A first scenario many would anticipate is Trump’s push to roll back Biden’s flagship climate policies such as the Inflation Reduction Act and its $369 billion in tax breaks and subsidies for clean energy.

As a result, renewable-energy stocks, represented by the iShares Global Clean Energy ETF ICLN, will continue to get hammered after a brutal 2023, said Tim Urbanowicz, head of research and investment strategy at Innovator ETFs.

Last year, the renewable-energy sector witnessed one of the toughest years in its short history due to supply-chain issues, rising financing costs and a notable slowdown of secondary market transactions. ICLN fell for three consecutive years between 2021 and 2023, after scoring an over 140% annual return in 2020 on Biden’s election victory, according to FactSet data.

Meanwhile, utility companies, which have been betting on renewables for years, have tumbled since 2023 as the interest-rate sensitive sector became less attractive compared with U.S. government debt and money-market funds. The S&P 500 utilities sector XX:SP500.55 is the worst-performing sector of the large-cap benchmark index SPX so far this year, down 4.7% compared with the S&P 500’s 2.5% advance year-to-date, according to FactSet data.

“A lot of those names have been supported by hefty subsidies, which if we see a Trump presidency, is going to be much less favorable on,” Urbanowicz told MarketWatch via phone on Wednesday.

Conversely, Trump’s proposal to increase investment in fossil fuels and roll back regulations aimed at accelerating the transition to electric vehicles, may be supportive for the beaten-down traditional energy ETFs tracking oil-and-gas companies, said Urbanowicz.

The SPDR Oil & Gas Exploration & Production ETF XOP was up only 0.8% in 2023, while the S&P 500 energy sector XX:SP500.10 recorded a yearly decline of 4.8% over the same period. The sector has fallen 1% so far in January 2024, according to FactSet data.

“It’s important to be either establishing or adding to a position in those energy companies, especially a lot of oil and gas names, simply for the fact that they’re so beaten down, so they have very low starting valuations,” said Urbanowicz. “That spring is loaded and those companies will do extremely well” if Trump is elected.


Sectors exposed to international trade

Trump has made it clear he plans to double down on his “America First” agenda, insisting that he will institute a system of tariffs of 10% on most foreign goods.

The tariff threat rattled global markets in 2018 and 2019. The iShares MSCI Mexico ETF EWW dropped 16.5% in 2018, while the iShares MSCI China ETF MCHI slumped 21% over the same period but bounced back in 2019 after the U.S. and China resumed trade talks, according to FactSet data. 


Urbanowicz questioned whether Trump would actually impose the 10% tariff if he wins again as the U.S. core inflation is still hovering around 4%-level, compared with less than 2% six years ago.

“I would be very curious to see even if he tries to pursue those policies for the fact that American people don’t like the inflation that we’re dealing with right now,” he said. “That is not going to be viewed as favorably by the market.”


Defense and aerospace sectors

However, one likely winner would be stocks in the defense sector, said Isaac Boltansky, managing director and director of policy research at BTIG. There would be far more support for military spending in general with a Republican in the White House, he said in a Saturday client note.

The iShares U.S. Aerospace & Defense ETF ITA, which tracks U.S.-listed manufacturers, assemblers and distributors of aircraft and equipment for the defense industry, rose 18.9% and 33.9% in the first two years of Trump’s presidency between 2016 and 2020, respectively, according to FactSet data. That compared with merely 8.5% and 8.8% advance in the first two years of Biden’s tenure.

Defense stocks will be “insulated from the margin compression” that’s going on in other stock-market sectors as there’s a “huge demand” in aircrafts and equipment, especially in light of escalating geopolitical tensions, Urbanowicz said.

“They’re [defense stocks] going to continue to pass through price increases and maintain growth margins from where they’re at now,” he said. “They are not just military defense stocks, but I would expect them to be treated as defensive over the next couple of years.”


Source: MarketWatch