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Trump Passes Order to Fix U.S. Infrastructure: ETFs in Focus

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President Donald Trump’s most recent activity involves passing an executive order aimed at reducing restrictions and regulatory burden in order to speed up infrastructure projects.


This revokes an Obama-era rule aimed at imposing strict reviews of projects in flood-prone areas in order to battle sea-level rise and flooding. The Obama-era rule required scientific factoring of how infrastructure projects would withstand floods and rise in sea level. Eliminating this rule means focusing on short-term gains and ignoring long-term outlook.


Although Trump has promised not to pass projects that might pose a threat to the environment, this order should not be a shocker given his take on climate change.


In a move toward his vow of spending $1 trillion on public and private infrastructure, Trump’s most recent order would speed approvals for roads, bridges, highways etc. Trump’s administration proposes $200 billion in government funding over a period of 10 years, as he works towards making his investment plan a reality.


Trump has repeatedly compared U.S. infrastructure to that of a third-world country. He also added that the defeat of the healthcare bill will not be a drain on his confidence for passing the infrastructure policies.


Many environmentalists and flood experts have criticized this order, as it is not only a threat to the environment, but also might be a drag on taxpayer money relating to flood related damage control. Per an article on voanews.com, an estimated $260 billion has been spent on flood control between 1980 and 2013.  


However, the order is expected to bode well for companies in the Materials sector. These companies can expect a surge in demand as infrastructure projects expedite and spending increases (read: ETF Asset Report : Developed Markets Rule in Q2).


Let us now discuss a few ETFs focused on providing exposure to U.S. equities in the materials sector (see all Materials ETFs here)


Materials Select Sector SPDR Fund (XLB - Free Report)


This fund is one of the most popular ETFs tracking the U.S. materials sector.


It has AUM of $3.5 billion and charges a fee of 14 basis points a year. From a sector look, the fund has high exposure to Chemicals, Containers & Packaging and Metals & Mining with 73.71%, 12.02% and 8.94% allocation, respectively (as of June 30, 2017). The fund’s top three holdings are Dow Chemical , E. I. du Pont de Nemours and Company and Monsanto Co. (MON - Free Report) with 11.88%, 11.74% and 8.52% allocation, respectively (as of August 15, 2017). The fund has returned 11.06% in the last one year and 8% year to date (as of August 15, 2017). It currently has a Zacks ETF Rank 3 (Hold) with a Medium risk outlook (read: 3 Quotes For Investing During Uncertain Times).


Vanguard Materials ETF (VAW - Free Report)


This fund is a low-cost ETF that seeks to provide exposure to U.S. materials companies.


It has AUM of $2.3 billion and charges a fee of 10 basis points a year. From a sector look, the fund has high exposure to Specialty Chemicals, Diversified Chemicals and Fertilizers & Agricultural Chemicals with 21.90%, 20.60% and 9.60% allocation, respectively (as of July 31, 2017). The fund’s top three holdings are Dow Chemical, E. I. du Pont de Nemours and Company and Monsanto Co. with 9.1%, 8.3% and 6.0% allocation, respectively (as of July 31, 2017). The fund has returned 12.60% in the last one year and 7.26% year to date (as of August 15, 2017). It currently has a Zacks ETF Rank 3 with a Medium risk outlook.


iShares U.S. Basic Materials ETF (IYM - Free Report)


This fund is a popular ETF that seeks to provide exposure to the U.S. materials sector.


It has AUM of $715.28 million billion and charges a fee of 44 basis points a year. From a sector look, the fund has high exposure to Diversified Chemicals, Specialty Chemicals and Fertilizers & Agricultural Chemicals with 27.80%, 23.35% and 13.43% allocation, respectively (as of August 14, 2017). The fund’s top three holdings are Dow Chemical, E. I. du Pont de Nemours and Company and Monsanto Co. with 11.81%, 11.66% and 8.52% allocation, respectively (as of August 14, 2017). The fund has returned 13.34% in the last one year and 8.19% year to date (as of August 15, 2017). It currently has a Zacks ETF Rank 3 with a High risk outlook.


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