The SPDR S&P Homebuilders ETF (NYSEArca: XHB) and the iShares U.S. Home Construction ETF (NYSEArca: ITB) are up an average of 6.5% to start 2017 and some traders believe more upside is on the way for homebuilders equities and the related exchange traded funds.
The equal-weight XHB mixes stocks such as Tempur Sealy (NYSE: TPX), Williams-Sonoma (NYSE: WSM) and Restoration Hardware (NYSE: RH) with pure play homebuilders such as Lennar (NYSE: LEN) and Toll Brothers (NYSE: TOLL) among others. Conversely, ITB is more of direct play on dedicated hombeuilders stocks.
Some investors believe Trump will follow through on campaign promises to reduce corporate taxes, cut back on regulations and throw billions of dollars into the U.S. economy. However, the expansionary rhetoric has caused the Federal Reserve to tighten its monetary policy, which could push up mortgage rates.
“Miller Tabak managing director and equity strategist Matt Maley said in a recent interview that the ITB, comprised of homebuilders and construction stocks, is close to hitting the $30 mark; that’s been “incredibly important resistance” for the exchange-traded fund,” reports CNBC.