Broader US stock markets have been racing since early spring. On August 18, the index closed at 3,389.78, above its previous peak of 3,386.15 in February. So far in the year, the SPDR S&P 500 ETF (NYSE :), an exchange-traded fund (ETF) index, is up more than 5%.
Still, many investors are wondering if they see a rise in colored glasses, especially given the upcoming US presidential election on Tuesday, November 3.
Since the markets are always forward-looking, they are likely to take into account electoral developments between now and November. With the uncertainty of an election, we can expect some measure of it, especially if there is a neck-and-neck battle leading up to the final day. Still, certain stocks will benefit from the election itself, regardless of who is in the lead.
Below are 2 ETFs that could benefit if the presidential race warms up in the coming weeks:
1. Communication Services Select Sector SPDR Fund
Current price: $ 60.27
52 Week Range: $ 38.68 – $ 60.94
Current Dividend Yield: 0.74%
Expense Ratio: 0.13% per year, or $ 13 with an investment of $ 10,000
The Communication Services Select Sector Fund (NYSE 🙂 provides exposure to US media, retail and software companies.
XLC, which tracks the communications Services Select Sector Index currently has 26 holdings. The top three are Facebook (NASDAQ :), Alphabet Class C (NASDAQ 🙂 and Class A (NASDAQ :). The shares of these two internet giants make up about 45% of the net assets, which are about $ 10.5 billion.
We won't know who will win the White House until November 3 at the earliest. But previous elections have shown that media companies tend to be winners regardless of the party's candidate. After all, they are reaping billions of dollars in advertising around this important event.
If there is any delay in election results, communications and advertising companies will benefit even more.
The combined share of Facebook and Alphabet of the duopoly of the US digital ad market is more than 50%. Therefore, investors who believe that social media and advertising are likely to be dominant themes during election season will want to explore XLC further.
Other notable companies in the ETF include Charter Communications (NASDAQ :), Comcast (NASDAQ :), Fox Corporation Class A (NASDAQ :), Fox Corporation Class B (NASDAQ :), News Corp A (NASDAQ :), News Corp B (NASDAQ :), ViacomCBS (NASDAQ 🙂 and Walt Disney (NYSE :). These companies are among the leading media companies embracing digital applications and online advertising.
Finally, stocks in microblogging company Twitter (NYSE 🙂 may also be dragging their way in the coming months. a wide variety of politicians, including President Trump, are regular users of the social media platform. It can be difficult to quantify the impact of tweets by politicians, especially by the executive branch. However, we would argue that controversial statements or groundbreaking announcements from well-known politicians would drive traffic to the platform.
Year-to-date (YTD), XLC is up more than 12%. It even hit a record high of $ 60.88 on August 19. The fund is likely to offer better value if the price falls below USD 60 and especially towards the USD 55 level.
2. Global X Video Games & Esports ETF
Current price: $ 26.59
52 Week Range: $ 13.98 – $ 26.81
Current Dividend Yield: 0.09%
Expense Ratio: 0.50%, or $ 50 with an investment of $ 10,000
According to statistics from The American Presidency Project, the voter turnout in the 2016 US presidential election was 55.67%. If one also takes into account data from previous elections, it would be fair to assume that more than 40% of eligible US voters will not go to the polls in November and will vote the event entirely.
Therefore, the second ETF comes from the world of gaming and esports. Businesses in the industry have benefited immensely from the pandemic's conclusion as more and more people play video games. The trend could also continue into the final months of 2020, especially if people stay at home and work from home.
The Global X Video Games & Esports ETF (NASDAQ 🙂 invests in companies that develop or publish video games, facilitate the streaming and distribution of video games or esports content, own and be active in competitive esports leagues, or produce hardware used in video games and esports, including augmented and virtual reality.
That's why HERO, which tracks the Solactive Video Games & Esports Index, gives investors access to a wider range of businesses. The fund's five largest holdings are Sea (NYSE 🙂 NVIDIA (NASDAQ :), Nintendo (OTC :), Activision Blizzard (NASDAQ 🙂 and Electronic Arts (NASDAQ 🙂 . The five companies make up about 30% of HERO & # 39; s net worth, which stands at $ 220 million.
YTD, HERO is up more than 60%. Like XLC, it also hit a record high on August 18. Any drop below the $ 25 level would rather make HERO an attractive long-term game.
