Trump 2.0 ETF Playbook: ETFs to consider in a Trump 2.0 market - preparing your portfolio

ETFs to consider in a Trump 2.0 market: Preparing your portfolio

In light of recent analysis on the potential impacts of a Trump administration on various sectors, investors may want to consider reallocating their portfolios to align with the new market dynamics. Charu Chanana’s article on key policy shifts under a Trump 2.0 administration outlines several areas where U.S. policy changes could reshape investment opportunities, from fiscal adjustments and trade tariffs to energy and tech policy. She notes that “deregulation and an emphasis on energy independence could favor traditional energy sectors, boosting oil and gas stocks,” and that “financials may benefit from rising yields and deregulation.”

Building on these insights, this article explores various accumulating ETFs that investors could use to gain exposure to sectors identified in Charu’s analysis as potential winners or areas to watch under a Trump 2.0 administration. This includes sectors such as energy, financials, defense, small caps, and others.

1. Energy sector ETFs: capitalizing on deregulation and energy independence

With a Trump administration likely to prioritize energy independence and reduce regulations on traditional energy, the U.S. oil and gas sector could see significant activity. Charu’s analysis highlights this potential, noting that “deregulation and an emphasis on energy independence could favor traditional energy sectors.”

Potential ETFs:

• Energy Select Sector SPDR Fund (Ticker: XLE): This ETF provides targeted exposure to U.S. energy companies, particularly in the oil and gas industries, which could benefit from domestic energy-focused policies.
• iShares Global Energy ETF (Ticker: IXC): Offering a global energy sector focus, this ETF includes major international oil and gas companies, aligning well with an energy independence agenda.

2. Financial sector ETFs: positioned for rising yields and deregulation

Financials, particularly banks, may gain from a Trump administration's approach to fiscal policy. Charu noted that “financials may benefit from rising yields and deregulation, with potential improvements in net interest margins and profitability.” Deregulation and possible corporate tax reductions could provide further tailwinds for the sector.

Potential ETFs:

• Financial Select Sector SPDR Fund (Ticker: XLF): This ETF focuses on U.S. financial institutions, including large banks that may benefit from deregulation and rising yields.
• iShares U.S. Financials ETF (Ticker: IYF): This ETF provides broad exposure to the U.S. financial sector, offering a mix of banks, insurers, and asset managers.

3. Defense sector ETFs: aligned with possible increases in defense spending

Potential for higher defense spending due to geopolitical tensions could drive growth for defense contractors. Charu’s article points to “higher defense spending” as a possible growth driver in this sector.

Potential ETF:

• iShares U.S. Aerospace & Defense ETF (Ticker: ITA): This ETF provides exposure to global companies in aerospace and defense, including U.S.-based defense contractors that may benefit from increased spending.

4. Small-cap ETFs: benefiting from domestic-focused policies

Policies that favor U.S.-centric growth and tax cuts could support smaller domestic companies. Small-cap stocks, which are often more focused on U.S. operations, may benefit from a more domestic policy approach.

Potential ETFs:

• iShares Russell 2000 ETF (Ticker: IWM): This ETF tracks the Russell 2000 Index, which represents a broad swath of U.S. small-cap companies, potentially benefitting from U.S.-focused policies.
• SPDR S&P 600 Small Cap ETF (Ticker: SLY): This ETF focuses on small-cap companies in the S&P 600 Index, which emphasizes U.S.-centric, smaller firms.

5. Precious metals ETFs: gold as a safe haven in uncertain times

Gold may offer a hedge against inflation, trade frictions, and market volatility, especially if tariffs and fiscal adjustments lead to economic uncertainties. Charu’s analysis highlights gold’s role as “a safe-haven asset and inflation hedge.”

Potential ETFs:

• VanEck Gold Miners ETF (Ticker: GDX): This ETF focuses on companies involved in gold production, rather than physical gold itself, offering leveraged exposure to the performance of gold prices.
• SPDR Gold Shares (Ticker: GLD): This ETF provides direct exposure to physical gold, allowing investors to hold gold as a hedge against inflation and volatility.

6. International ETFs: diversifying away from tariff-impacted regions

U.S. tariffs and trade tensions could affect regions like China and the EU, while other countries may attract capital as safer investment destinations. Charu suggests that “China and Hong Kong stocks” could face challenges, with capital flows potentially shifting toward markets like India and Japan.

Potential ETFs:

• iShares MSCI India ETF (Ticker: INDA): This ETF provides exposure to Indian equities, a region that could attract capital as investors diversify away from tariff-impacted markets.
• iShares MSCI Japan ETF (Ticker: EWJ): Japan may be a stable investment destination, and this ETF offers exposure to Japanese equities, which could benefit from increased capital inflows.

7. Sector ETFs at risk: monitoring required

Certain sectors, such as renewables and consumer discretionary, may encounter challenges under Trump 2.0 policies. Tariffs and a focus on traditional energy could create headwinds for these sectors, suggesting investors may want to monitor performance or consider limited exposure.

Potential ETFs:

• iShares Global Clean Energy ETF (Ticker: ICLN): This ETF provides exposure to renewable energy companies globally, which could face challenges if policies prioritize traditional energy over renewables.
• Consumer Discretionary Select Sector SPDR Fund (Ticker: XLY): Targeting the U.S. consumer discretionary sector, this ETF may be vulnerable if consumer spending slows due to higher tariffs impacting import costs.

8. Tech sector ETFs: balancing opportunities and risks

Big Tech may experience mixed effects under Trump 2.0, with opportunities in AI-related growth areas balanced by challenges from tariffs and potential supply chain disruptions. Charu points to a “commitment to reviewing and reducing unnecessary regulations on AI,” suggesting certain tech stocks may benefit from a lighter regulatory environment.

Potential ETFs:

• Invesco QQQ Trust (Ticker: QQQ): This ETF offers broad exposure to the S&P 500, which includes significant weight in large-cap U.S. tech companies that may benefit from innovation-friendly policy changes.
• iShares Global Tech ETF (Ticker: IXN): For investors seeking global tech exposure with an ESG focus, this ETF provides access to information technology companies with sustainability considerations.