President Barack Obama addressed some of the major issues facing our economy today and expressed his desire to work toward resolving them. Here are a few exchange traded funds (ETFs) that could be opportunities as the nation’s problems remain in the spotlight.
Health Care. The vote to fill the seat of late Sen. Edward M. Kennedy shifted power in the Senate. Scott Brown won the race against Democrat Martha Coakley 52% to 47%, costing Democrats their 60-vote majority. Brown has been an opponent of health care legislation, and many fear it’s a death knell for the effort. [Massachusetts race.] The health care bill would bring in more patient business to hospitals if it were to pass legislation. But Obama is not giving up, and appealed to lawmakers to “take another look at the plan we’ve proposed” and not to walk away from reform.
- iShares Dow Jones U.S. Health Care Sector (NYSEArca: IYH)
- Vanguard Health Care (NYSEArca: VHT)
- Health Care Select Sector (NYSEArca: XLV)
Regional Banks. Obama is pushing to limit the size of the nation’s largest banks, although he limited the amount of time spent on this aspect of the economy last night. Smaller banks won’t face the regulations and restrictions the big banks might, giving them more appeal than ever. Banks that stuck to their traditional business models throughout the crisis are already demonstrating their health through strong earnings. Regional banks do need some caution, though, because a high unemployment late could lead to more consumer default on credit lines. [Why regional banks could come out ahead.]
- iShares Dow Jones U.S. Regional Banks (NYSEArca: IAT)
Energy. Oil futures are up today following the State of the Union address, thanks to the sense of optimism about both the domestic and global economy that some feel the speech gave. As the world stabilizes, demand for fuel is expected to once again rise. The Commodity Futures Trading Commission (CFTC) has released a few proposals on commodity investments. The CFTC cited United States Natural Gas (NYSEArca: UNG) and United States Oil (NYSEArca: USO) as examples for the new “Proposed Position Limit Rule.” The CFTC has called for tighter rules on energy trading and stricter definitions of traders who are exempt. [The CFTC’s new proposal.]
- United States Natural Gas (NYSEArca: UNG)
- United States Oil (NYSEArca: USO)
Green Energy. It’s no secret that Obama is firmly on the side of fixing climate change. In last night’s speech, he specifically called for more “safe, clean” nuclear plants. He also reiterated his call for developing solar cells, clean coal, biofuels and rebates for Americans who boost their homes’ energy efficiency. [Socially responsible ETFs gaining in popularity.]
- PowerShares Global Clean Energy (NYSEArca: PBD)
- First Trust NASDAQ Clean Edge Green Energy (NYSEArca: QCLN)
- Market Vectors Nuclear Energy (NYSEArca: NLR)
- Claymore/MAC Global Solar Energy (NYSEArca: TAN)
Our economy. Despite huge rallies in the stock markets, Treasuries are still in high demand as a safe haven. Bonds serve to reduce volatility in a portfolio while generating income – the quarterly, semi-annual or annual fixed income is generally more than dividend payments from stocks. [What’s the deal with bond ETFs?] Obama also said he wanted to see exports double in the next five years, as well as tax cuts that would put more cash in the hands of small business owners.
- iShares Barclays 7-10 Year Treasury Fund (NYSEArca: IEI)
- iShares Russell 2000 Index (NYSEArca: IWM)
- SPDRs (NYSEArca: SPY)
Inflation? The Federal Reserve yesterday said that inflation is expected to remain low for the time being, and Obama didn’t address the issue much in his speech, choosing to focus on job creation. With practically every country in the world rolling out billions to ease the burdens of the financial crisis, the possibility of high inflation has a lot of people seeking a safe haven in gold. Furthermore, many countries are not yet in good fiscal health, the United States included. Additional sovereign-debt downgrades from ratings agencies are but one potential trigger of a currency crisis, which could make gold an appealing store of value. [Reasons gold may still have life left.]
- SPDR Gold Shares (NYSEArca: GLD)
Max Chen contributed to this article.