ETFs To Consider If Kamala Harris Wins the U.S. Election
Here’s how Canadian investors can position themselves for a Kamala Harris win with these ETFs.
With less than 50 days until the U.S. election, the respective economic policies of former president Donald Trump and current Vice President Kamala Harris are being discussed in greater depth. As expounded in a previous article, the former president's economic policy can be summarized as 'America First', with its core tenets being corporate tax cuts, trade protectionism, and reducing government regulation.
Though the full details of Vice President Harris's economic policy have not been revealed, the information publicly shared thus far has provided a baseline understanding of her economic focus. Furthermore, given her association with the current Biden administration, it is believed that her economic actions will not differ greatly from those currently being enacted.
Candidate Harris's Economic Agenda
Vice President Harris's economic policy aims to support the middle class and bolster small and medium-sized businesses. Regarding the former, helping the middle class attain housing is a focal element, as the "Build the American Dream: Lowering the Costs of Renting and Owning a Home," agenda calls for the construction of 3 million new housing units in the next four years, outlines actions for creating a fairer rental market, and proposes $25,000 in downpayment support for first-time homeowners.
As an extension of this agenda, a proposal for the expansion of the Low-Income Housing Tax Credit (LIHTC) and the first-ever tax incentive for homebuilders who build starter homes sold to first-time homebuyers. Building upon the Biden-Harris administration's proposed $20 billion innovation fund, there is a proposal for a $40 billion fund that would support local innovations in housing supply solutions, catalyze innovative methods of construction financing, and empower developers and homebuilders to design and build affordable homes.
While the Harris campaign team has not stated its intention to use tariffs aggressively to protect U.S. businesses, tariffs currently in place for Chinese-made goods are assumed to remain. Recently, the Biden administration reinstated steep tariff hikes on Chinese imports, including a 100% duty on electric vehicles (EVs), to boost protections for strategic industries from China's state-driven industrial practices. Should Kamala Harris become president, these tariffs are believed to remain.
On the topic of taxes, Harris wants to raise taxes on corporations and the highest earners, following Biden's budget. She also proposed expanding tax deductions for small businesses, backs increasing the corporate tax rate to 28 percent from 21 percent, and has promised not to raise taxes on people making less than $400,000 per year.
Harris and Trump do share one commonality – defense spending. In March 2024, the Biden-Harris administration proposed an $849.8 billion defense budget for fiscal year 2025, which represents a 4.1 percent increase from fiscal 2023 levels that were enacted.
ETFs To Consider If Harris Is Elected President
If the Harris Administration's focus is on bettering the middle class, the Consumer Discretionary sector is poised to benefit from the economic actions taken. In looking at the sub-industries present within the Consumer Discretionary sector, Homebuilding is listed. While there are seemingly no Canadian ETFs that provide a pure-play focus on U.S. Home Construction (Please Note: The iShares U.S. Home Construction ETF (Ticker: ITB) and SPDR S&P Homebuilders ETF (Ticker: XHB) are U.S. ETFs with such a focus), Canadian investors can utilize a Canadian Depository Receipt to invest in Home Depot, as they are a seminal stakeholder in U.S. home construction.
In supporting U.S. small and midsized businesses, along with increasing military defense spending, the Industrial sector would greatly benefit from her potential economic actions. The First Trust AlphaDEX™ U.S. Industrials Sector Index ETF (Ticker: FHG/FHG.F) provides pure-play exposure to the U.S. Industrial sector. As highlighted in a previous article, the U.S. government outspends at least a dozen other nations in military expenditures, which is expected to continue under a Harris presidency. As such, the iShares U.S. Aerospace & Defense Index ETF (Ticker: XAD), which is designed to track U.S. companies' performance in the aerospace and defense sector, is a solution that should be considered.
A regional geographic investment opportunity is poised to grow under the Harris Administration. It is no secret that the U.S. is trying to stem China's technological progress and adoption, as evidenced by the recently renewed tariffs on EVs and the U.S. CHIPS (Creating Helpful Incentives to Produce Semiconductors for America) Act, which was enacted in 2022 to lure microchip manufacturing back to the United States after several decades of individual companies offshoring the technology. The U.S. is increasingly engaging in 'Friendshoring', which is the act of manufacturing and sourcing from countries that are geopolitical allies. As the U.S. moves away from using China as a manufacturing hub in the global supply chain, other emerging economies are positioning themselves as a viable alternative – most notably India. If further economic action against China is taken under the Harris Administration, India is among the countries that could benefit. For investors looking to gain exposure to India, should the previously mentioned scenario occur, the iShares India ETF (Ticker: XID) provides comprehensive exposure to a broad cross-section of Indian equities.
Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.
