Days after the Trump inaugural, the Inside ETFs conference is kicking off in Hollywood, Florida, and by all accounts it will be the biggest gathering around exchange-trade funds yet, with close to 2,500 participants spread out over four days of meetings.
One hot topic on everyone's mind: Donald Trump and his impact on the markets. Anyone for Trump ETFs?
I'm only partly kidding. The rise of "thematic investing" — placing bets on themes like Cyber Security ETF or Cloud Computing or Airlines — makes it perfectly feasible that someone might float a "Trump ETF" consisting of stocks that may benefit from his presidency.
Even if that doesn't happen, the early buzz on the conference is that there is plenty of debate on how to construct a Trump-based ETF portfolio, including:
Past this, there is a lively debate about the wisdom of concocting a basket of "Trump ETFs." The challenge with the Trump trade is he says he is strong on defense, then slams defense stocks. He's pro-business, but he slams drug stocks. That's why many are telling clients with strong stomachs to gear up for more "Trump headline investing" around sectors like Oil & Gas Exploration, Defense & Aerospace and Pharmaceuticals.
Health Care is a particular challenge, since the focus on Obamacare is such a huge unknown. Will Trump insist on a single-payer system? Will he go after drug companies and make them pay less?
Here's the problem: The Trump presidency will be headline-driven, so making a traditional sector call may be tricky. But is there a chance he could suddenly start talking about, say, how awesome the restaurant industry is? Sure. And on that day — and maybe for some time after — you can expect heavy volume in the Restaurant ETF. Yes, there really is a Restaurant ETF.
That's why we will likely see more industry-specific ETFs as investors try to figure out broad thematic plays rather than old-school sector plays.
As for Trump, the best investing idea I've heard is from a trader who said that Twitter should sell co-location services to high-frequency traders so they can be as close as possible to Twitter's servers so they will get news of any Trump tweets before anyone else.
Now that's one way for Twitter to raise revenues!