The intersection of Wall Street and Capitol Hill can be a
perilous one for investors. Regardless of one's political
leanings, there is no getting around the fact that there have
been some legislative hurdles for investors to contend with over
the past several months.
The fiscal cliff was averted, but that gave way to the
sequestration debate, a shining example that some U.S.
politician, like their European counterparts, do not much like
austerity. Through it all, some sector and bond
that theoretically should have been vulnerable to the goings on
in Washington, D.C. have shown remarkable fortitude.
How long those good times will last for is anyone's guess, but
here are few noteworthy example of ETFs that have performed
admirably in the face of political challenges.
iShares Dow Jones US Aerospace & Defense Index Fund (NYSE:
) The iShares Dow Jones US Aerospace & Defense Index Fund and
the PowerShares Aerospace & Defense ETF (NYSE:
) make for two of the most obvious candidates to have possibly
been hurt by the sequestration debate. Remember, the 2013
sequester includes $42.7 billion in defense spending cuts,
according to the Congressional Budget Office
No big deal for these ETFs because they are both higher on a
year-to-date basis. Or is it a big deal? "It" being
sequestration. At the very least, sequestration is starting to
way on ITA and PPA. The former is down almost four percent in the
past month while the PowerShares offering is lower by 3.7 percent
over the same time. Importantly, both ETFs fell below their
50-day moving averages earlier this week.
PowerShares Build America Bond Portfolio (NYSE:
) As was noted
prior to the 2012 presidential election
, BAB and comparable ETFs were worth paying attention to for a
simple reason. President Obama wants to make the Build America
Bonds program permanent. Republicans do not.
Obviously, President Obama won reelection, but that was not
the only hurdle for BAB and its rivals to overcome. Sequestration
includes reducing the originally promised 35 percent subsidy on
Build America Bonds to about 32 percent for U.S. states and
Again, no big deal because BAB, which has a 30-day SEC yield
of 4.04 percent, is up almost two percent in the past month. The
rival PIMCO Build America Bond ETF (NYSE:
) is higher by nearly three percent over the same time.
iShares Dow Jones U.S. Medical Devices Index Fund (NYSE:
) Lots of folks in the investment world have a hard time
admitting when they are wrong. Let us attempt to change that by
admitting we predicted IHI and medical device stocks could suffer
due to Obamacare
. The thesis being that President Obama's health care package
includes a punitive tax on medical device companies that is
expected to cost tens of thousands of jobs and billions of
dollars in lost U.S. GDP growth.
Not surprisingly, IHI reacted adversely immediately following
the 2012 election, but the ETF has proceed to gain over seven
percent this year. Not a bad performance when considering nothing
has been about the medical device tax.
Actually, IHI's run high is borderline stunning when
considering Obamacare features a 2.3 percent tax on medical
devices, but that tax is on companies' gross sales. To be fair,
is trying to do something about the tax
. However, politicians trying to do something and actually being
successful are usually two different ballgames. IHI has traded
slightly lower in the past month.
For more on ETFs, click
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