ETFs to Watch as Biden Heads to White House

After winning the November election and the Georgia run-off election early this month, Joe Biden took oath as the 46th president of the United States on Jan 20. This is the first time in a decade when Democrats took control of both chambers of Congress, as well as the White House. The new administration is expected to bring a wave of policy shifts and roll back some of the regulations implemented by the former president Donald Trump’s administration.

Quick Insight Into Biden Policies or Promises

In his initial days in office as president, the former vice president is expected to sign dozens of executive orders including ones to fight the coronavirus pandemic, combat climate change, promote racial equity, rejoin the Paris climate, and reverse Trump's ban on entry of people from certain Muslim majority countries.

Infrastructure has been at the top of Joe Biden’s priorities since the beginning. He plans to invest $2 trillion in roads, highways, airports, ports as well as digital infrastructure and clean tech. To going greener, the new president’s plan includes 100% clean energy by 2035, building more solar panels and wind stations, and net-zero emissions by 2050. He also seeks to upgrade millions of buildings and homes to be more energy efficient, stop abandoned oil and gas wells, reclaim mines and make environmental justice a key consideration (read: Go Greener in 2021 With Best ETFs & Stocks of 2020).

Among the other targets, the Democratic administration plans to expand the Affordable Care Act, allow public health agencies to deal with COVID-19, and pass a stimulus bill to support struggling doctors, hospitals and nursing homes.

Additionally, Biden has the friendliest political environment for the cannabis industry in U.S. history. This is especially true as it seeks to expedite the legalization of marijuana at the federal level, thereby providing a boost to the industry. Now, with the Blue Wave, the markets are anticipating that the Marijuana Opportunity Reinvestment and Expungement (MORE) Act passed by the House in December to soon be approved by the Senate, which otherwise had lesser chance to pass. The bill aims to decriminalize cannabis at the national level for the first time, and remove cannabis from the list of federally controlled substances and erase certain federal convictions.

The new administration will also make a push for a massive $1.9 trillion coronavirus-relief plan. The plan offers payments of $1,400 to most Americans, increased enhanced federal unemployment benefits by $100 to $400 per week and extension of these through the end of September, and $350 billion in aid to state and local governments, which were excluded from Congress’ latest package. It also seeks to raise the minimum wage to $15 per hour, provide additional funds to schools and ramp up COVID-19 testing and vaccination program by $20 billion. Additionally, the president aims to roll out 100 million vaccines in his first 100 days of his presidency (read: Biden Favors $1.9T COVID Stimulus: ETFs to Win/Lose).

After taking office, Biden would also take immediate action to repeal Trump’s 2017 tax reform. He would raise taxes on wealthy individuals and corporations. Biden is looking to hike the corporate tax rate from 21% to 28% that could raise $1.3 trillion over the next decade and be used toward manufacturing, education and health care. He would add a 15% minimum tax for corporations with more than $100 million in profits, and seeks to double the tax to 21% from 10.5% charged on foreign income from licensing and fees on intellectual properties.

ETFs in Focus

Biden’s policies and promises are highly beneficial for some sectors. Let’s highlight some ETFs from different corners of the market that would be in focus under Biden’s presidency:

Global X U.S. Infrastructure Development ETF (PAVE): It offers exposure to companies that stand to benefit from a potential increase in infrastructure activity in the United States, including those involved in the production of raw materials, heavy equipment, engineering and construction. The ETF has gained about 23% over the past three months.

Global X Lithium & Battery Tech ETF LIT: This product provides global exposure to a broad range of firms engaged in lithium mining, refining and battery production. It has gained more than 62% over the past three months.

Invesco WilderHill Clean Energy ETF PBW: This ETF offers exposure to the publicly traded companies in the United States that are engaged in the business of advancement of cleaner energy and conservation. It has soared more than 72% in the past three months (read: 5 High-Flying Stocks of the Top ETF in Q4).

Global X Cannabis ETF POTX: This fund targets the cannabis industry and skyrocketed more than 93% over the past three months.

Invesco DWA Consumer Cyclicals Momentum ETF PEZ: This ETF provides exposure to consumer cyclical companies that are showing relative strength (momentum). It has gained about 24% over the past three months.

iShares Core MSCI Emerging Markets ETF IEMG: This product offers exposure to companies in a broad range of emerging market countries. It has added 21% over the past three months (read: 5 Emerging Market ETFs Surging to Start 2021).

SPDR S&P Health Care Services ETF XHS: It provides exposure to health care services segment of the broad healthcare space, which comprises the following sub-industries: health care distributors, health care facilities, health care services, and managed health care.

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Invesco WilderHill Clean Energy ETF (PBW): ETF Research Reports
iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports
Invesco DWA Consumer Cyclicals Momentum ETF (PEZ): ETF Research Reports
SPDR S&P Health Care Services ETF (XHS): ETF Research Reports
Global X Lithium & Battery Tech ETF (LIT): ETF Research Reports
Global X Cannabis ETF (POTX): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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