4 Sector ETFs to Gain on Trump's Triumph

Donald Trump’s victory over Harris on Nov. 6, 2024 is likely to produce a mixed response in the global market thanks to his uncertain or rather controversial trade, immigration and geopolitical policies. Though it is too early to predict how the U.S. economy will perform during the Trump presidency, ‘Trumponomics’ or hopes of loose fiscal policies have injected fresh optimism among investors.

Market futures started moving upward as Trump began to take the lead. S&P 500-based SPY, Dow Jones-based DIA and Nasdaq-based QQQ registered about 2.5%, 3.5% and 2.7% gain, respectively, on Nov. 6, 2024.

Below, we highlight a few sector-based exchange-traded funds (ETFs) that may win in Trump presidency.

Industrials

Trump prefers bringing U.S. manufacturing jobs back to the country and strictly opposes outsourcing. Hence, the industrial sector should start cheering his win. The Industrial Select Sector SPDR Fund XLI added 3.9% in the premarket on Nov. 6, 2024.

It is widely believed that North America and Western Europe are high-cost nations and Latin America, Eastern Europe, and most of Asia — especially China — are low-cost destinations. This divide is seen as the reason for the rise in manufacturing offshoring in recent times. But Trump’s win may now bolster the trend of manufacturing reshoring.

Financials

There are two reasons why financial ETFs should perform better. First, historically, financial stocks have performed better with Republicans in the White House thanks to their tolerant policies. Secondly, a rising rate scenario is a plus for banking stocks. U.S. benchmark Treasury bond yields shot up to 4.42% on Nov. 6 from 4.26% the day earlier. Trump's vows to cut taxes may boost inflation expectations, which is pushing bond yields higher.

As a result, financial ETFs soared. SPDR S&P Bank ETF KBE added 11.9%. Moreover, Trump is known for deregulation in the banking sector. In Trump’s previous term, Congress approved a plan in May 2018 to scale down stringent banking regulations, the Dodd-Franck Act, undertaken at the height of the 2008 financial crisis. Regional banking ETFs benefited from this move. No wonder, SPDR S&P Regional Banking ETF KRE surged about 13.4% on Nov. 6.

Artificial Intelligence

The Trump administration had previously made concerted efforts in promoting artificial intelligence (AI). He signed the American AI Initiative executive order on Feb. 11, 2019. The order pledged to double AI research investment and established the first set of national AI research institutes.

The order also included a plan for AI technical standards and established guidance for the federal government’s use of AI. Trump also signed an executive order on Dec. 3, 2020, promoting the use of trustworthy AI in the federal government. It shows that AI stocks and ETFs should have great days during Trump’s ruling. Roundhill Generative AI & Technology ETF CHAT added 2.7% on Nov. 6, 2024.

Defense

Needless to say, Trump is envisaged as being aggressive in foreign policy. In his previous term, he had stressed on the need for additional investments in missile defense. He is likely to reinstate some of his own policies from four years ago. So, defense and aerospace ETFs like iShares US Aerospace & Defense ITA gained about 3.2% on Nov. 6, 2024.

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