Biden Or Trump, These 4 ETF Zones Are Set To Gain

Democratic presidential nominee Joe Biden is clearly leading the 2020 presidential race, according to various sources. The most-popular prediction market, predictit, reported that Joe Biden is leading Donald Trump 64 to 39. smarkets.com expects to have a Joe Biden Presidency, as they give him a 63.7% chance of securing a victory against Donald Trump’s 33.6%.

Per the RealClearPolitics poll, Joe Biden leads Donald Trump by 3.8 percentage points. According to FiveThirtyEight forecast data, Joe Biden is favored to win the 2020 election against Donald Trump. He is predicted to get 335 electoral college votes, while Trump is expected to receive 203.

Though Joe Biden’s lead is widening in the polls, election uncertainty has largely been weighing on investors’ sentiment. As such, investors are preparing to reposition their portfolio heading into the election, which is just less than four weeks away.

We have highlighted ETF from some zones, which are expected to move higher irrespective of the winners in the election:

Small Caps

Per the report, small caps tend to perform well after a presidential election due to renewed focus on domestic issues. Whoever wins the election needs to prioritize issues like tax and trade policies, health care reform, and Big Tech oversight to get the American economy back on track. According to research by Citi strategist Scott Chronert, the average return for the Russell 2000 is 15% in the year after a presidential election since 1980. This is about 4 percentage points better, on average than large-cap stocks.

Some of the ETFs from this space like Vanguard Small-Cap Growth ETF (VBK)iShares Russell 2000 Growth ETF (IWO), and SPDR S&P 600 Small Cap Growth ETF (SLYG) look intriguing as we head into Election Day. These funds have a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy).

Value

Value investing appears compelling ahead of the election given the slowly recovering economy and the potential arrival of a coronavirus vaccine that will boost consumer spending and in turn lift value stocks. Additionally, continued antitrust scrutiny of big tech companies by the candidate who wins the election (Biden or Trump) will weigh on growth investing, thereby providing an edge to value. Further, value investing seems more tempting given its promise of dividend yield in a near-zero rate environment and uncertainty in the stock market.

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