Already up more than 90% year-to-date, the VanEck Vectors Steel ETF (NYSEArca: SLX) is easily one of this year’s best-performing non-leveraged industry ETFs.
Some steel market observers believe Donald Trump’s victory in last week’s presidential election can carry steel stocks and SLX even higher.
Steel has been strengthening this year on policy changes. Since the start of March, U.S. steel has gained ground after Congress passed a new customs and trade enforcement bill allowing the Obama administration to take action against Chinese dumping. The Department of Commerce imposed a 265.79% tariff on Chinese steel.
During the campaign, Trump proposed significant infrastructure spending as an avenue for boosting the U.S. economy. If those plans see the light of day, SLX and steel stocks could benefit.
According to Trump’s book, “Crippled America: How to Make America Great Again,” he has called for a “trillion-dollar rebuilding program” that will be “one of the biggest projects this country has ever undertaken.”
The infrastructure in the U.S. is not the only area that requires attention. Many developed economies have also neglected spending on this area while developing countries still require new investments to expand existing networks to fully optimize their economies.[related_stories]
With global central bank monetary policies reaching their limits in an attempt to stimulate growth, it may be up to international governments to step in and spend on large infrastructure projects as a means to promote productivity and bolster economic growth.
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“One of Trump’s priorities during the campaign was his desire to invest $1 trillion in improving the nation’s infrastructure over the next 10 years,” reports ETF Daily News. “It’s a bold initiative made more complicated by the fact that he wants to fund it with private investment. While this plan may seem a bit audacious, both Republicans and Democrats generally agree that additional infrastructure spending is necessary. Trump also has the benefit of a Republican controlled House and Senate, so it’s likely that some type of significant infrastructure spending will pass.”
With the economy recovery maturing, the materials sector, which is closely tied to the prices of raw materials, have traditionally done well as inflation rises and late-cycle economic expansions help support demand.
VanEck Vectors Steel ETF
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.