As the U.S. election nears, significant capital is flowing into two manufacturing-themed ETFs: First Trust RBA American Industrial Renaissance ETF (AIRR) and Tema American Reshoring ETF (RSHO).
AIRR, with $1.4 billion in assets, is on track for its longest inflow streak in a decade. RSHO has also seen a dramatic increase, with assets growing nearly ninefold this year. Analysts suggest these ETFs could benefit from a potential Trump administration's focus on reducing reliance on China.
Additionally, BlackRock (BLK) launched the iShares US Manufacturing ETF (MADE) this month to support domestic economic growth.
These inflow trends contrast with other "Trump trades."
Revival of the Trump Trade
As the 2024 election approaches, interest in the "Trump trade" has resurged among investors. The Trump trade is the belief that deregulation, tax cuts, reduced immigration, and increased tariffs could benefit certain sectors and industries and significantly impact inflation and bond yields.
What are Trump's chances of winning the election?
According to Real Clear Politics, betting markets predicted a 47% chance of President Trump winning the 2024 U.S. presidential election on May 31. By July 15, this figure had risen nearly 19 percentage points to a peak of 66%. Since President Biden withdrew from the race, Trump's odds have decreased by about 12 percentage points to 54%.
What does the capital inflow represent?
Although AIRR and RSHO are relatively small in the $9.5 trillion U.S. ETF market, their inflows may indicate that some investors expect manufacturing and supply chain-related stocks to perform well regardless of who becomes the next president. Analysts at Bloomberg Intelligence point out that this capital flow reflects long-term confidence in domestic economic growth rather than a simple bet on Trump's re-election.
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