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ETFs to Gain Despite Stalled Stimulus Talks

In the latest development on the ongoing U.S. fiscal stimulus negotiations, President Donald Trump unexpectedly stalled virus-related relief talks until after the election, putting cold water on investors’ previous hopes of a near-term injection of fiscal stimulus.

Inside the Tug-of-War

Per the most recent development, “Democrats have proposed spending $2.2 trillion. The Trump administration has called that “unserious,” but raised the offer to close to $1.6 trillion, including a $400 weekly pandemic jobless benefit. Democrats want $600 a week,” per Reuetrs.

Previously, Senate Republicans proposed $650 billion. But Trump urged “GOP lawmakers to go for a bigger coronavirus stimulus package, saying he liked “the larger numbers” in a compromise $1.5 trillion stimulus plan from a bipartisan group of House lawmakers,” as quoted on Bloombergquint. But it was way lower than the $2.2 trillion favored by House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer.

What Lies Ahead of the Investment World?

Trump’s latest move will likely impact the investment world. A weaker-than-expected nonfarm payrolls gain of 661,000 in September puts more stress on the need of the stimulus package. The unemployment rate dropped to 7.9% but is still significantly higher than the pre-pandemic level.

Investors should note that Democrats and the White House have apparently agreed on a slew of relief provisions, “including another $1,200 direct payment to most Americans, funds for a second round of small business loans, money for schools and $25 billion to help cover airline payrolls as companies plan tens of thousands of furloughs,” per a CNBC article. This means no matter who wins the election, some areas will likely get the relief package for sure.

Meanwhile, Democrats wanted $436 billion in relief for state and local governments, while Mnuchin offered $250 billion in aid. Republicans also proposed liability protections for businesses and schools, which Democrats did not agree to. 

Against this backdrop, below we highlight a few ETFs that should remain uninterrupted in the coming days.

ETFs to Benefit

U.S. Global Jets ETF (JETS)

Despite walking out on the talks, U.S. President Donald Trump said late on Tuesday that Congress should extend $25 billion in new payroll assistance to U.S. passenger airlines, furloughing thousands of workers amid downing travel demand. Democrats also want protection for the airlines workers. 

Consumer Staples Select Sector SPDR Fund XLP

Both parties agreed on a $1,200 direct payment to most Americans. Some unemployment benefits will also likely to be approved post-election. So, staples ETF like XLP should see a smooth run.

 iShares Russell 2000 ETF (IWM)

Funds for a second round of small business loans should provide assistance of small-cap companies. The segment is likely to benefit no matter who wins the election as Trump supports the “America First” agenda while Biden endorses “Buy American.” This, in turn, would benefit small-cap ETFs as these are heavily dependent on domestic companies (read: Trump or Biden, Small-Cap Stocks & ETFs to Gain).

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Consumer Staples Select Sector SPDR ETF (XLP): ETF Research Reports
 
iShares Russell 2000 ETF (IWM): ETF Research Reports
 
U.S. Global Jets ETF (JETS): ETF Research Reports
 
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Zacks Investment Research
 
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