Don't Let Trump ETFs & Stocks Fool You

President Donald Trump’s pro-growth policies aimed at boosting economic growth, increasing inflation and flooding companies with excess cash and earnings growth are definitely attractive propositions for stock markets. Some sectors – financials, industrials, materials and aerospace & defense – will benefit relatively more from Trump policies.

However, the positives seem to be reversing as Trump’s lofty promises are going empty. After 70 days in the office, Trump seems to have faltered on his promises on almost all fronts, including his top-priority health care reform.


The healthcare bill, American Health Care Act, his first major legislative move, collapsed after it failed to garner votes from Congress Republicans. While the move benefited hospital stocks, it took a toll on health insurers. UnitedHealth UNHAnthem ANTM and Cigna CI are among the worst hit that saw their shares surge since the election in the anticipation of the repeal of the Affordable Care Act, also known as Obamacare. UNH has a Zacks Rank #2 (Buy) while the other two stocks have a Zacks Rank #3 (Hold).

Given this, SPDR S&P Health Care Services ETF XHS and iShares U.S. Healthcare Providers ETF IHF are on investors’ radar. Both funds carry a Zacks Rank #3. Health care has a dismal Sector Rank in the bottom 38%.


The financial sector moved up dramatically on hopes of the scaling back of the Dodd-Frank Act which prevents banks from taking excessive risks. However, the collapse of the health care reform bill has raised worries over Trump’s ability to deliver on his other promises. In particular, bank stocks and ETFs will be in deep trouble if Trump fails to deliver. Major banks – Bank of America Corporation (BAC - Free Report) Citigroup Inc. (C - Free Report) and SunTrust Banks Inc. (STI - Free Report) – have a Zacks Rank #2 while SPDR S&P Regional Banking ETF KREPowerShares KBW Bank Portfolio KBWB and Financial Select Sector SPDR Fund (XLF - Free Report) have aZacks Rank #1 (Strong Buy). The sector also boasts a solid Rank in the top 31%.


The industrial sector, having a Zacks Rank in the top 13%, is hogging attention as Trump has promised to spend a trillion dollar on rebuilding highways, bridges, hospital and other U.S. infrastructure. More than two months into his presidency, these plans are yet to show any sign of materializing. That said, surging top-ranked stocks such as Century Aluminum Company CENXAlcoa Corp. AAParker-Hannifin Corporation PH and First Trust RBA American Industrial Renaissance ETF AIRR will be on investors’ radar over the coming months. CENX has a Zacks Rank #2 while others have a Zacks Rank #1.


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Disclosure: None.

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