26
Jan

Trump's Wall Reinforces Materials ETFs – ETF Trends

President Donald Trump’s has reiterated his plan to build a wall along the Mexican border, reinforcing construction and materials-related exchange traded funds.

Trump tweeted Tuesday “Among many other things, we will build the wall!” ahead of his visit to the Department of Homeland Security, the agency that has jurisdiction over securing the border, Bloomberg reports.

The wall between the U.S. and Mexican border has been one of Trump’s key promises during his presidential campaign trail. The president has also promised to increase spending on construction, including $1 trillion into infrastructure. Trump’s plans to raise a wall across the Mexican border and other spending policies could fuel demand for cement, concrete and crushed stone

Beneficiaries of this potential construction boom include Vulcan Materials (NYSE: VMC), along with cement makers Martin Marietta Materials Inc. (NYSE: MLM) and Eagle Materials Inc. (NYSE: EXP).

“What we heard yesterday and today is that he is going to deliver,” Commerzbank AG analyst Norbert Kretlow told Bloomberg. “The possibility for infrastructure investments is now a lot higher.”

Garik Shmois, an analyst at Longbow Research, calculated that the wall could use about $1.2 billion of cement, concrete and aggregates.

“So many companies have exposure around the border that it would be divided up fairly evenly,” Shmois said, estimating that about two-thirds of the potential benefit from Trump’s total infrastructure plans is already priced into material-suppliers’ shares. “No one company is going to be disproportionately impacted by this.”

ETF investors interested in gaining exposure to the construction boom have a number of options available. For instance, the Materials Select Sector SPDR (NYSEArca: XLB), Vanguard Materials ETF (NYSEArca: VAW) and Fidelity MSCI Materials Index ETF (NYSEArca: FMAT) provide broad exposure to the materials sector.

Additionally, the Guggenheim S&P Equal Weight Materials ETF (NYSEArca: RTM), which equally weights components and includes a larger tilt toward smaller U.S. companies, holds larger tilts toward construction materials sub-sector, including 8.0% VMC and 7.9% MLM.

Additionally, while the PowerShares Dynamic Building & Construction Portfolio (NYSEArca: PKB) holds large positions in homebuilder names, PKB also includes materials exposure like 5.1% ML and 5.0% VMC, along with others.

For more information on the materials sector, visit our materials category.

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