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Trump's Presidential 2 Years: Must-See ETF Areas

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In President Trump’s two years of office, U.S. markets have been soaring thanks to his series of reformative initiatives. While the first year was all about the Trump bump and reflationary economic measures, the second year i.e. 2018 can easily be accredited to his protectionist agenda or trade war tensions.

Overall, SPDR S&P 500 ETF (SPY - Free Report) and SPDR Dow Jones Industrial Average ETF (DIA - Free Report) and Invesco QQQ Trust (QQQ - Free Report) advanced 27%, 37.7% and 44.6%, respectively, just before the midterms.

Below we highlight a few sector and country ETFs that were talk of the town during the first two years of the Trump presidency. Let’s see how these areas performed till midterms.

Technology

This is one of the best-performing sectors under the Trump administration as it specifically benefited from the President’s tax reform. Tech titans hoard huge cash overseas and are poised to benefit the most from Trump's proposed tax reform policy. Technology Select Sector SPDR Fund (XLK - Free Report) added 45% within these two years, while ARK Web X.0 ETF (ARKW - Free Report) surged 123%.

Defense

Trump is a staunch proponent of higher defense budget. His signed the $717-billion 2019 defense spending bill into law — the largest allotted to U.S. defense in August 2018. As a result, SPDR S&P Aerospace & Defense ETF (XAR - Free Report) added about 54.7% in the past two years (read: Aerospace & Defense ETFs: Can the Outperformance Continue?).

Healthcare

It is another sector that stole the show. The sector mainly sizzled this year. The sector is viewed as a defensive one which has helped it to shine amid market doldrums emanating from trade war tensions between the United States and China. 

President Trump’s announcement of the drug plans in May was in the best interest of pharma companies. The drug plans will likely put pressure on U.S. trading partners, forcing them to pay more for medicines. The U.S. health care supply chain is consolidating fast, with deals across the industry ranging from insurers, pharmacies to drug distributors.

If these were not enough, tax reform has perhaps proved to be a big boon to the sector. Per an article published on Reuters, domestically geared health care companies that focus on services are likely to benefit from a lower tax rate and generate superior cash flows.

As a result, Invesco S&P SmallCap Health Care ETF (PSCH - Free Report) surged 93% in these two years, while Health Care Select Sector SPDR ETF (XLV - Free Report) added more than 30% (read: Health Care ETFs Outperforming: Will the Rally Last?).

Consumer Discretionary

The consumer discretionary sector also benefited considerably from the reflation rally, as tax reforms will help businesses and consumers, boosting discretionary spending. Also, solid job creation and an overall in the bounce in the economy helped this segment to propel higher. VanEck Vectors Retail ETF (RTH - Free Report) jumped 41% from the election to the time before midterms.

Industrial

Trump is a believer of the "Buy American and Hire American" theory. With Trump highly expected to bring U.S. manufacturing jobs back to the country and strictly oppose outsourcing, manufacturing or industrial ETFs got a boost.

He is also in favor of beefing up public spending by hundreds of billions of dollars on infrastructure. So, the anticipation of an approval of big-ticket infrastructure package started pushing infrastructure stocks higher right after Trump’s election win (read: Signs of Progress in US-Sino Trade Talks Boosts These ETFs).

Overall, Industrial Select Sector SPDR ETF (XLI - Free Report) advanced 22% and SPDR S&P Metals and Mining ETF (XME - Free Report) added 18.4% in two years. Investors should note that some of the gains from 2017 were eaten up this year due to trade tensions with China, as industrials related stocks have been in vulnerable positions this year.

Energy

Coal was once a struggling area but VanEck Vectors Coal ETF (KOL - Free Report) gained 11% in the last two years. President Trump promised to revive the stressed American coal industry. And keeping his campaign promise, the American President has pulled the country out of the landmark Paris climate change agreement, which was expected to bring an end to the fossil fuel era.

Country ETFs

Given tensions with Mexico and Canada related to North American Free Trade Agreement or NAFTA, those two country ETFs were on red alerts. However, Trump rewrote the agreement in 2018 with both parties. Plus, trade war tensions with China have been rife all through 2018. As a result, Mexico ETF EWW (down 16.3%), Canada ETF EWC (up 5.2%) and China ETF FXI (up 9.2%) must be on investors’ radar (read: Country ETFs to be Impacted by Trump's Tariff Plans).

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