ETF Picks for a Clinton or Trump Presidency | ETF Trends

Election day is right around the corner, and the markets are sitting on edge. With a new president (likely Trump or Clinton) and administration, investors can expect some major changes that could ripple through the stock market and potentially lead to targeted exchange traded fund opportunities.

For instance, Republican nominee Donald Trump has called for cutting back on regulations that have gripped the financial industry in response to the 2008 financial downturn and favored expanding the military in the ongoing fight against terrorism.

Trump has said he would “dismantle” financial reform, or the Dodd-Frank financial reforms, that have caused big banks to take on increased capital requirements to obviate another depression event associated with high-risk debt. On the other hand, Democratic runner Hillary Clinton has defended Dodd-Frank as a means of cracking down on perceived risky banking practices.

A Trump Office

With Trump in office, investors may look more favorably on banks and financial stocks, along with sector-related ETF options like the SPDR S&P Bank ETF (NYSEArca: KBE), which targets some of the largest U.S. banks, or the broader Financial Select Sector SPDR (NYSEArca: XLF), which includes a hefty bank sub-sector tilt, along with other financial services names.

Trump has also called for the elimination of the sequester on defense spending and increasing military spending to bolster troops and the number of war vehicles in an attempt to prepare the country against the number of treats we continue to face. The nominee has also stressed the need to upgrade current defense systems, such as modernizing Navy cruisers.

Consequently, if elected, Trump could be a boon for the aerospace and defense industry, along with related ETFs, like the iShares U.S. Aerospace & Defense ETF (NYSEArca: ITA) and PowerShares Aerospace & Defense Portfolio (NYSEArca: PPA), which include industrial names like Boeing (NYSE: BA), United Technologies (NYSE: UTX), Lockheed Martin (NYSE: LMT) and Raytheon (NYSE: RTN), among others.

If it Goes to Clinton

Alternatively, if Clinton wins out on election day, we may see continued support for the healthcare sector from the ongoing Affordable Care Act, or so-called Obamacare, and improved relations with trade partners whom have been targeted under Trump’s more protectionist rhetoric.

While Clinton has put a spotlight on high-priced drugs in the biotechnology and pharmaceutical space, she may continue to back Obamacare and support the broader healthcare industry, with more insured Americans using healthcare services. Investors may look to broad healthcare options like Vanguard Health Care ETF (NYSEArca: VHT) and the Health Care Select Sector SPDR (NYSEArca: XLV) for exposure to industry.

Additionally, Mexican assets are seen as an election barometer, weakening when Trump advanced in polls and strengthening when the Republican nominee lost ground. Trump has questioned NAFTA and free trade, vowed to add tariffs on Mexican imports, pledged to deport millions of undocumented immigrants and wanted to build a border wall to keep out Mexican immigrants. If Clinton wins out, investors may ride a potential rally with country-specific ETF options like the iShares MSCI Mexico Capped ETF (NYSEArca: EWW), which holds broad range of companies in Mexico, and SPDR MSCI Mexico Quality Mix ETF (NYSEArca: QMEX), which tracks a more customized basket of Mexico stocks that were selected based on metrics like value, quality and low volatility.

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.