4 Under-The-Radar ETFs Soaring High After Trump Win

Trump’s victory in the presidential election has been a game changer for the stock market as hopes for a massive fiscal stimulus, deregulation and tax cuts sent stocks soaring and bonds tumbling.

The stock market is now entering a new era. For the past eight years, market gains were driven mainly by the Fed’s ultra-accommodative monetary policy. Now, fiscal stimulus is expected to drive stocks higher while the Fed begins normalization of the monetary policy.

Certain sectors of the market--like financials, industrials and materials--are expected to benefit more than others from Trump’s polices. Further, smaller-cap stocks look much better positioned than their larger-cap counterparts.

US economic growth continues to improve and will get further boost from stimulus spending. The dollar has been surging of late on expectation of rising rates in the US. A rising dollar hurts larger companies with significant overseas operations. Trump’s proposed protectionist trade policies may also hurt multinationals.

On the other hand, smaller, domestically focused companies are rather immune to currency and trade policy related headwinds. Per FT, the effective corporate tax rate for small-cap US companies is about 32%, compared with 26% for large companies. Thus, lower corporate taxes will be a boon for this group. 

As a result, some ETFs that focus on smaller-cap stocks within the sectors that are best positioned in the current environment have soared after the presidential election. Below, we have highlighted four such small cap ETFs that have been the biggest beneficiaries of the Trump bump and have handily beaten the broader small-cap ETF-- the iShares Russell 2000 (IWM - Free Report) .

PowerShares S&P Small-Cap Materials ETF (PSCM - Free Report)

This product focuses on small cap companies principally engaged in the business of producing raw materials, including paper or wood products, chemicals, construction materials, and mining and metals.

It is currently ranked Zacks #1 (Strong Buy) and is up about 21% in the past one month.

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