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President Trump signed legislation on Dec 27 evening that offers all-important government spending and $900 billion in pandemic-related stimulus. The total $2.3 trillion omnibus spending bill, which finances the government through September 2021, passed both chambers of Congress on Dec 28 night.
Stimulus Tug-of-War Background
Investors should note that as part of the recent U.S. fiscal stimulus negotiations, President Donald Trump initially stalled virus-related relief talks until after the election. Democrats had proposed spending $2.2 trillion.
The Trump administration had called that “unserious,” but raised the offer to about $1.6 trillion, including a $400 weekly pandemic-driven jobless benefit. Democrats wanted the amount to be $600 a week, per Reuters. Before this, Senate Republicans had proposed $650 billion in total aid. But Trump had urged “GOP lawmakers to go for a bigger coronavirus stimulus package.”
What’s Inside the New COVID-Bill?
The $900 billion coronavirus relief portion of the bill takes into account $600 stimulus checks (compared with the previous stimulus payments of $1200), renewal and extension of two federal unemployment programs, an additional weekly payment of $300 as well as $25 billion in rental assistance, an extension of the eviction moratorium, addition of another round of the Paycheck Protection Program (PPP) for small businesses, $13 billion in food assistance, and $7 billion to increase access to broadband as well as funding for vaccine distribution and schools.
However, in the signing statement, the president Trump stated that the Senate “will start the process for a vote that increases checks to $2,000, repeals Section 230, and starts an investigation into voter fraud,” as quoted on Yahoo Finance.
Though the latest announcement has probably been baked in at the current level, some areas would definitely benefit. Below we highlight those investing zones.
Stimulus measures and vaccine shots should boost long-term treasury yields. As regional banks fare well in a steepening yield curve environment, IAT should benefit. The underlying Dow Jones U.S. Select Regional Banks Index of the fund is a free-float adjusted market capitalization-weighted index, which measures the performance of the regional bank sub-sector of the U.S. equity market.
Small-Caps – iShares Russell 2000 ETF (IWM - Free Report)
The segment is likely to benefit as small caps are domestically focused. Stimulus checks, further unemployment benefits and PPP for small businesses have high chances of boosting this area (read: Trump or Biden, Small-Cap Stocks & ETFs to Gain).
The technology sector is sure to gain as coronavirus crisis has brightened the demand of technology. Over the long term too, the sector is sure to thrive. Moreover, this kind of cyclical sector normally performs well in a trending economy.
Telecom – iShares U.S. Telecommunications ETF (IYZ - Free Report)
The government’s plan is to provide assistance worth $7 billion to access broadband. This along with work-and-learn-from-home trend should give another boost to the telecommunication ETFs like IYZ.
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Trump Signs Stimulus Measures: ETF Areas to Gain
President Trump signed legislation on Dec 27 evening that offers all-important government spending and $900 billion in pandemic-related stimulus. The total $2.3 trillion omnibus spending bill, which finances the government through September 2021, passed both chambers of Congress on Dec 28 night.
Stimulus Tug-of-War Background
Investors should note that as part of the recent U.S. fiscal stimulus negotiations, President Donald Trump initially stalled virus-related relief talks until after the election. Democrats had proposed spending $2.2 trillion.
The Trump administration had called that “unserious,” but raised the offer to about $1.6 trillion, including a $400 weekly pandemic-driven jobless benefit. Democrats wanted the amount to be $600 a week, per Reuters. Before this, Senate Republicans had proposed $650 billion in total aid. But Trump had urged “GOP lawmakers to go for a bigger coronavirus stimulus package.”
What’s Inside the New COVID-Bill?
The $900 billion coronavirus relief portion of the bill takes into account $600 stimulus checks (compared with the previous stimulus payments of $1200), renewal and extension of two federal unemployment programs, an additional weekly payment of $300 as well as $25 billion in rental assistance, an extension of the eviction moratorium, addition of another round of the Paycheck Protection Program (PPP) for small businesses, $13 billion in food assistance, and $7 billion to increase access to broadband as well as funding for vaccine distribution and schools.
However, in the signing statement, the president Trump stated that the Senate “will start the process for a vote that increases checks to $2,000, repeals Section 230, and starts an investigation into voter fraud,” as quoted on Yahoo Finance.
Though the latest announcement has probably been baked in at the current level, some areas would definitely benefit. Below we highlight those investing zones.
ETF Beneficiaries
Banks – iShares U.S. Regional Banks ETF (IAT - Free Report)
Stimulus measures and vaccine shots should boost long-term treasury yields. As regional banks fare well in a steepening yield curve environment, IAT should benefit. The underlying Dow Jones U.S. Select Regional Banks Index of the fund is a free-float adjusted market capitalization-weighted index, which measures the performance of the regional bank sub-sector of the U.S. equity market.
Small-Caps – iShares Russell 2000 ETF (IWM - Free Report)
The segment is likely to benefit as small caps are domestically focused. Stimulus checks, further unemployment benefits and PPP for small businesses have high chances of boosting this area (read: Trump or Biden, Small-Cap Stocks & ETFs to Gain).
Consumer Services – iShares U.S. Consumer Services ETF (IYC - Free Report)
Both parties agreed on direct payment checks to most Americans along with unemployment benefits. This is a positive for the consumer sector.
Technology – Technology Select Sector SPDR Fund (XLK - Free Report)
The technology sector is sure to gain as coronavirus crisis has brightened the demand of technology. Over the long term too, the sector is sure to thrive. Moreover, this kind of cyclical sector normally performs well in a trending economy.
Telecom – iShares U.S. Telecommunications ETF (IYZ - Free Report)
The government’s plan is to provide assistance worth $7 billion to access broadband. This along with work-and-learn-from-home trend should give another boost to the telecommunication ETFs like IYZ.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>