Key ETF Areas to Track as Biden Victory Looks Quite Likely

Apart from COVID-19, the presidential election is a pretty hot topic now, especially since the event is just a little more than two months away. Chances are rising that the blue wave of Democrats will take control over the House and Senate in November. According to a poll, Democratic presidential candidate Joe Biden now has a 71% chance of winning the White House. Biden is nine points ahead of President Donald Trump, according to the latest survey by The Wall Street Journal and NBC.

Against this backdrop, below we highlight some agenda of Biden that would make/break these ETF investing areas.

Unlike President Trump, Biden seeks a tax hike. President Trump’s tax lay lowered the corporate tax rate from 35% to 21%, starting 2018. Analysis by the Tax Foundation revealed that Biden’s plan is to hike the corporate tax rate to 28%, though not as high as 35% where it was before the Trump era.

Biden is also proposing to levy a minimum tax rate of 15%, a potentially damaging outcome for some major companies that pay little in taxes. Biden's tax plan points at revenues needed to pay down the huge debt incurred to fight the recession. He has proposed setting the long-term capital gains tax for those earning more than $1 million at the same level as income tax. That would cause a shoot-up for top earners from 20% to 39.6%.

If there is a tax hike, some sectors that are enjoying a low tax rate environment materially (like banks, retail, domestically geared healthcare companies) would be under pressure. SPDR S&P Regional Banking (NYSE:KRE) ETF ("Build Back Better" Plan Of Biden To Boost These ETFs ).

The Democratic presidential candidate’s campaign eyes investing in restoring highways, roads and bridges, while trying to boost adoption of electric vehicles and trains. His plan also calls for changing water pipes, building out rural broadband access and updating schools, among other measures.

iShares U.S. Infrastructure ETF clean energy economy by 2035 and having net zero emission by 2050.

Tax incentives for renewable energy projects such as wind and solar are due to end in 2020. Biden has pledged to extend these and support the pickup of projects like energy-efficient buildings.Biden plans to upgrade 3 million vehicles into the electric form that the government regularly purchases. First Trust NASDAQ Clean Edge Green Energy Index Fund AMZN to pay more tax, and for the repeal of Section 230, which guarantees social media companies immunity from libel cases based on content uploaded by users. But so far he has said little about privacy or antitrust, the two biggest regulatory challenges facing the industry.” Amazon-heavy ETF RTH may see some selloff.

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Financial Times noted that Biden has pledged to take back Trump’s controversial immigration policies

through a number of executive actions. They include raising the annual cap on refugees to 125,000 from the 18,000-ceiling set by Trump. The move could go in favor of tech ETFs that depend a lot on outsourcing and immigration.

Like Trump, Biden intends to take “aggressive trade enforcement actions” against China or anyone he believes is guilty of currency manipulation or other anti-competitive trade practices. But he has said that “he will enlist the support of US allies to do so on a multilateral level, unlike Trump”, as quoted on Financial Times. So, market disruptions on the trade front with China are likely. Growth ETFs like Vanguard Growth ETF (Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Written By: Zacks Investment Research