Telecommunications ETF Investing Guide

After a lukewarm first half of 2017, most of the major telecommunications stocks did well in the third quarter. The  U.S. telecom regulatory body, Federal Communications Commission (FCC), has given enough indications of its leniency compared with the Obama administration. The FCC is most likely to roll back a slew of stringent regulations of the previous regime. The FCC’s stance of being less restrictive will aid mergers and acquisitions, which are likely to spur growth in 2018.

Momentum to Continue in 2018

A growing economy speeds up the demand for real-time voice, data, and video manifold. The escalation in demand has encouraged telecom service providers to undertake large network extensions while upgrading plans. The rising demand for technologically superior products has been a silver lining for the telecommunication industry in an otherwise tough environment. This in turn has given a boost to the demand for telecom equipment manufacturers.

Additionally, a major characteristic of the telecommunications industry is that it is immune to international geopolitical disturbances even when these lead to economic fluctuations. The need to remain connected is so very human, springing from our earliest tendencies to communicate with our fellow human beings. An era of digitization and technology is essentially built on this human craving. It is here that telecommunications come to the fore as a necessary utility. Consequently, any non-U.S. economic volatility is not expected to have an immediate effect on the industry.

Furthermore, President Donald Trump’s proposed policy changes have made the overall economic outlook fairly bullish. Major proposals such as a pledge to spend $1 trillion in infrastructure projects over a period of 10 years, overhaul of the tax structure to reduce the tax burden and easy regulatory policies, are likely to spur higher consumer spending that may create about 25 million new jobs over a decade. This in turn will fuel long-term economic growth.

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