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ETF News And Commentary

After the first faceoff between Trump and Clinton on September 26, Democratic candidate Hillary Clinton is viewed as having an edge over Republican candidate Donald Trump. A nonscientific survey by indicated that 59% of 78,000 readers see Clinton as the winner of the first presidential debate. And as per a CNN/ORC review, 62% believe that Clinton won the contest.

The U.S. market was in the red prior to the debate in apprehension of the outcome of the debate plus the possibility of Trump gaining precedence. During the debate, the market futures tried to wipe out earlier losses (read: Trump or Clinton: These ETFs to Face Same Fate).

As the debate ended, Dow futures advanced 100 points while the S&P 500 Index futures rose 0.7%. Notably, Trump’s presidency is viewed as market unfriendly. What he has delivered in speeches so far are mostly “inward looking”, as per ABN Amro (read: ETFs to Watch as Trump Races Closer to Clinton).

If the gains in equity futures were not enough, the Mexican peso – the behavior of which is supposed to be negative on hints of Trump’s success – also recovered losses, as per CNBC. Trump vowed to make Mexico pay for a wall along the border as a part of his immigration plan. If this concept of Trump Wall turns into a reality, trade relation between Mexico and the U.S. would be hampered.

Tension built up lately as Trump’s popularity picked pace, though Clinton has mostly maintained a strong lead throughout the campaign. As of September 19, 2016, Clinton had 45.4% chance of winning while Trump had 44.8%.

Though two more debates will be held before the D-day, the wind is in favor of Clinton as of now.  Let’s take a look at what the immediate impact of the debate was on global markets and the ETFs that could be in focus if Hillary makes it to the White House.

Risk-On Market Behavior Post Debate

Since Trump does not support NAFTA (North American Free Trade Agreement) – which removes a major share of tariff on products traded between the U.S., Mexico, and Canada – and eventually terminates it fully – currencies of Canada and Mexico have come under question.

But investors should note that “the peso, Canadian dollar, S&P futures and Australian dollar are all surging -- very much a relief rally in risk assets”, as indicated by a senior currency strategist. The Mexican peso rose 1.8%, the highest in two months, as per Bloomberg. On the other hand, safe-haven currency Japanese yen fell 0.5%. This kind of asset class movement once more points to Trump’s defeat in the debate (read: Clinton vs. Trump: Best Stocks & ETFs to Bet On).

ETFs in Focus if Clinton Wins

Biotech in Trouble

Hillary Clinton’s sword-crossing with the pharma and biotech sector over the price gouging issue is known to all by now. So, if she makes it, it may turn out to be a difficult time for biotech ETFs like iShares NASDAQ Biotech ETF ((IBB - ETF report) ) (read: Inside the Recent Surge in Biotech ETFs).

ObamaCare to Prevail Over TrumpCare

With Clinton’s policy being viewed as an extension of Obama’s policy, the broader health care sectors will be benefited. Thanks to this iShares US Medical Devices ETF (IHI - ETF report) and SPDR S&P Health Care Equipment ETF (XHE - ETF report) may gain ahead.

Energy Sector Winners & Losers

Clinton is expected to embark on new regulations on fracking, the key cause of the U.S. energy sector boom. Clinton proclaimed that she would not back fracking in states or local communities that don’t want it because of pollution issues. ETFs like VanEck Vectors Unconventional Oil & Gas ETF ((FRAK - ETF report) ) may lose from this while alternative energy ETFs likePowerShares WilderHill Clean Energy Portfolio ETF (PBW - ETF report) and Guggenheim Solar ETF (TAN - ETF report) should gain. Clinton in fact planning a substantial impetus to solar energy.

What Impact Wage Hike Would Have on Economy?

Clinton seeks to hike the minimum wage from $7.25 to at least $12 per hour. This will likely hit several consumer discretionary companies that employ many such lower-income workers. This in turn will push up the cost structure of several retailers and restaurant companies.

But on the other hand, wage hike would increase the purchasing power of consumers and enable them to splurge on discretionary items. Now, it remains to be seen if higher revenues can make up for increased costs and generate stable profits. Whatever the case, Restaurant ETF BITE), consumer staples ETFs like Vanguard Consumer Staples ETF ((VDC - ETF report) ) and consumer dictionary ETFs like SPDR Consumer Discretionary Select Sector ETF (XLY - ETF report) will be in focus in the coming days.

Defense to Benefit

Clinton has always been seen as a supporter of ‘a strong U.S. military’ and this should give a boost to ETFs like iShares US Aerospace & Defense ((ITA - ETF report) ).

Banks May be Under Pressure

Clinton seeks to restrain extreme risk-taking tendencies among big financial institutions and curb risks lying underneath the shadow banking system. Clinton is in favor of levying a tax only on high-frequency traders who terminate a lot of orders. Plus, the Federal Reserve may remain more-or-less accommodative as it was in the Obama presidency. Both cases go against banking stocks and ETFs like PowerShares KBW Bank ETF (KBWB - ETF report) .

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