Trump or Biden: Whose Victory Will Benefit Tech ETFs?
The technology sector has delivered the promised returns in 2020, a year marked by uncertainties. In fact, major technology companies have shown resilience to the pandemic, which in turn, significantly supported the market momentum this year. The S&P 500 Information Technology Index has gained 26.4% so far (as of Sep 29) in comparison to the broader S&P 500’s 3.2% rise.
There is no doubt that the technology sector plays a key role in the U.S. economy but it has been under Trump administration’s scanner for a long time. In fact, going by experts, the technology space will be subjected to increased scrutiny no matter which candidate wins the presidential election.
Trump & Technology Sector
In his second tenure, Trump is expected to maintain and even expand the broad-scale regulatory scrutiny of technology companies, per the sources. The measures include antitrust investigations of Internet giants such as Alphabet Inc.’s (GOOGL) Google and Facebook Inc. (FB), allegations of anti-conservative bias online and restricting actions against several China-owned apps such as TikTok and WeChat, per The Wall Street Journal article.
Moving on, Trump is expected to emphasize on revoking Section 230 of the 1996 Communications Decency Act with the intention to scale back protections social-media companies are entitled to under it (as reported in The Wall Street Journal article). In fact, he tweeted on Sep 8 asking for a repeal of Section 230. Commenting on the issue, Samantha Zager, a Trump campaign spokeswoman, said that “President Trump will continue to advocate for an internet that embraces free speech over censorship,” per The Wall Street Journal article.
Biden & Big Tech
Joe Biden shares a stance similar to Trump regarding the market power that the major technology companies are enjoying, per the sources. He too advocates the repealing on the Section 230 but for a different reason. Biden wants social media companies to more actively and responsibly take down content that can be spreading rumours and false information, per The Wall Street Journal article. Also, experts believe that the Biden administration will take appropriate action to control and protect the jobs of workers that are potentially under threat due to technological innovations like self-driving vehicles.
Biden’s running mate Sen. Kamala Harris is believed to have cordial relationships with the technological sector during her previous term as district attorney of San Francisco and attorney general in California. The duo is believed to work on policies that will enhance the accountability and transparency of major technological companies instead of breaking up business units, per a S&P Global Market Intelligence article.
It is a widely known fact that the tech industry relies on high-skilled immigrant visas to employ workers. Trump has had a very strict stance on the immigration policies which he considers a threat to the U.S. economy. Experts believe that the Biden administration will relax the immigrations policies to some extent to allow high-skilled foreign nationals to get recruited by big techs. At the same time, Biden will try to balance out the impact of the move on the employment environment and wages in the United States, per the sources.
Technology ETFs to Consider
Summing the big tech policies of the contestants, experts believe that the technology sector might get a more conducive environment under the Biden administration. Against this backdrop, investors seeking to gain exposure to the big techs could consider the following ETFs:
Vanguard Information Technology ETF VGT — up 26.3% year to date
The fund seeks to track the performance of the MSCI US Investable Market Information Technology 25/50 Index. It charges investors 10 basis points (bps) in annual fees. The fund sports a Zacks ETF Rank #1 (Strong Buy), with a Medium-risk outlook (read: 3 Reasons Why Big Techs Are a Buy Now: ETFs in Focus).
The Technology Select Sector SPDR Fund XLK — up 26.3%
The fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Technology Select Sector Index. It charges investors 13 bps in annual fees. The fund flaunts a Zacks ETF Rank of 1, with a Medium-risk outlook (read: Sector ETFs to Win/Lose If Biden Wins Elections).
iShares U.S. Technology ETF IYW — up 28.5%
The fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Dow Jones U.S. Technology Capped Index. It charges investors 43 bps in annual fees as stated in the prospectus. The fund sports a Zacks #1 Ranked ETF, with a Medium-risk outlook (read: 4 Reasons to be Bullish on Microsoft ETFs Now).
Fidelity MSCI Information Technology Index ETF FTEC — up 26.1%
The fund seeks to provide investment returns that correspond, before fees and expenses, generally to the performance of the MSCI USA IMI Information Technology Index. It charges investors 8 bps in annual fees. The fund also flaunts a Zacks ETF Rank #1, with a Medium-risk outlook (read: ETFs to Gain as Microsoft Bets Big on Video Gaming).
iShares Expanded Tech-Software Sector ETF IGV — up 33.3%
This ETF provides exposure to software companies in the technology and communication services sectors by tracking the S&P North American Expanded Technology Software Index. The product charges 46 bps in annual fees and has a Zacks ETF Rank #1, with a High-risk outlook (read: Oracle Partners With TikTok: ETFs to Gain).
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Technology Select Sector SPDR ETF (XLK): ETF Research Reports
Fidelity MSCI Information Technology Index ETF (FTEC): ETF Research Reports
Vanguard Information Technology ETF (VGT): ETF Research Reports
iShares Expanded TechSoftware Sector ETF (IGV): ETF Research Reports
iShares U.S. Technology ETF (IYW): 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.