Positioning Your Portfolio for the Obama Administration - Ed McRedmond

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Includes: DBB, PBD, PBW, PKB, PSTL, PUW, PWND, PYZ
by: Grace Cheng

Barack Obama will be sworn in as the US President in a few days’ time, and investors are looking at how to position their portfolios to benefit from the new administration’s projects. In this interview, Ed McRedmond, Senior Vice President at Invesco Powershares, gives investors some ideas about how to position themselves using Exchange Traded Funds (ETFs).

The new administration has promised to take on major infrastructure upgrades as a way of boosting the economy. What would be some of the ways to take advantage of this upcoming government spending?

There are a number of options investors can look at to benefit from the new administration’s infrastructure plans. Logical beneficiaries of an increase in infrastructure spending would be companies focused on building, construction and basic materials and therefore ETFs such as the PowerShares Dynamic Building & Construction (PKB) and the PowerShares Dynamic Basic Materials Sector (PYZ).

It also appears that a major part of any infrastructure upgrades will include renewable energy infrastructure, which would likely benefit areas like wind power, solar power, geothermal and certainly energy efficiency where some of the new administration’s major appointees have significant expertise and interests. ETFs such as the PowerShares Clean Energy Portfolio (PBW), PowerShares Global Wind Energy (PWND) and PowerShares Progressive Energy (NYSE:PUW) provide exposure to companies that might benefit from an increase in spending on renewable energy infrastructure.

We’ve seen commodities slump over the last year. Will the Obama administration’s infrastructure projects give related commodities such as industrial metals a boost? If so, how can investors position their portfolio to take advantage of this?

Industrial metals might see an incremental boost in demand from infrastructure projects. A much bigger driver would be a pick-up in economic growth around the world. The PowerShares Global Steel (PSTL) and PowerShares DB Base Metals (DBB) ETFs would be two options offering exposure to this theme.

What is the main difference between your Progressive Energy Portfolio and Clean Energy Portfolio? Which of these portfolios can benefit under the new administration?

The PowerShares WilderHill Clean Energy Portfolio and PowerShares Global Clean Energy (PBD) focus on zero-carbon pure plays such as solar and wind while the PowerShares WilderHill Progressive Energy Portfolio focuses on innovative bridge technologies that reduce near-term pollutants stemming from fossil fuels and from today’s dominant energy sources. One or all of these ETFs might benefit from the incoming Obama administration, since all are relevant to the stated renewable energy goals of the new administration.

Do you think the new administration’s emphasis on the environment will inspire a worldwide adoption of clean technology? If so, how can an investor capitalize on this?

A big push from the new administration may inspire a greater global focus on clean technology, though it’s worth noting that the use of clean technology has already been adopted in a number of countries. One way for investors to capitalize would be through global ETFs that provide exposure to clean technology-related industries such as the PBW, PWND or PowerShares Progressive Transportation (PTRP).