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5 ETF Areas to Gain on COVID-19 Stimulus Deal

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Democratic and Republican leaders lately clinched an agreement on a new coronavirus relief deal worth around $900 billion that comprises a second round of stimulus checks and further unemployment benefits. The bill will soon be up for a vote in the House and the Senate.

The deal has been reached after months of negotiations for the next phase of government stimulus and “days before key relief provisions under the CARES Act and from executive actions are set to expire.”

Stimulus Tug-of-War Background

In the latest development on the ongoing 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 Lies Ahead?

From the above discussion, one can understand that the latest agreement calls for a relief that is much lower in amount. This time the direct payment to Americans will be $600 “per adult and child” compared with the previous stimulus payments of $1200.

Other provisions in the $900 billion deal take into account “renewing and extending two federal unemployment programs and an additional weekly payment of $300 as well as $25 billion in rental assistance, an extension of the eviction moratorium, $13 billion in food assistance, and $7 billion to increase access to broadband, Pelosi and Schumer said in their statement,” as quoted on Yahoo Finance.

Apart from being smaller in size, some sort of relief package has long been expected with no matter who wins the presidential election. As a result, the latest announcement has probably been baked in at the current level. Still, some areas would benefit. Below we highlight those investing zones.

ETF Beneficiaries

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.

iShares Russell 2000 ETF (IWM - Free Report)

The segment is likely to benefit as small caps are domestically focused. Stimulus checks and further unemployment benefits have high chances of boosting this area (read: Trump or Biden, Small-Cap Stocks & ETFs to Gain).

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.

AI Powered Equity ETF (AIEQ - Free Report)

The technology sector is sure to gain as coronavirus crisis has brightened the demand of technology. Moreover, this kind of cyclical sector normally performs well in a trending economy.

iShares U.S. Telecommunications ETF (IYZ - Free Report)

The government is planning 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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