Trump's 2019 Budget Blueprint: ETF Winners & Losers

On Feb 12, the Trump administration rolled out its 2019 budget proposal. The $4.4-trillion budget proposal charted sharp cuts to domestic programs, a fat rise in military spending and a swelling federal deficit. In a nutshell, the White House plan would lead to a $7 trillion to the deficit over the next 10 years and the national debt would shoot up to about $30 trillion.

Below we highlight some of the areas that were either hot or not in the budget blueprint as well as their related ETF impact.

Beneficiaries

Defense

The law raises military expenditure by $195 billion over the next two years and non-defense spending by $131 billion. The White House isoffering $540 billion in nondefense spending for 2019. A 14% increase in proposed funding should help defense ETFs like SPDR S&P Aerospace & Defense (NYSE:XAR) ETF (LON:XAR) , PowerShares Aerospace & Defense ETF PPA and iShares US Aerospace & Defense ETF (HM:ITA) (read: Best Sector ETFs & Stocks from Trump's First-Year Win).

Water

There is an initiative that would save $350 billion for drinking water pipes to guarantee that there is no another Flint, MI-style water crisis in the coming few years. This single initiative grossed more federal funds than the entire infrastructure plan. So, water ETFs like PowerShares Water Resources (OL:PHO) and First Trust ISE Water Index Fund FIW should benefit from this plan.

Agriculture

The Trump administration is looking to slash the Department of Agriculture’s discretionary budget by $3.5 billion or 15%. The budget would also lower federal crop insurance subsidies and cut spending for conservation programs and foreign food aid. The move came at a time when New York Farm Bureau indicated that “more dollars are needed for research to keep farms abreast of challenges such as climate change, invasive species, crop improvements, and animal health and welfare.” So, lack of funding may push up costs of agricultural produce and send PowerShares DB Agriculture ETF (MI:DBA) higher.

Losers

Environmental Protection Agency

There was a steep reduction in environmental, research and diplomatic programs that Trump has long been defiant of. A 25% cut has been proposed in the Environmental Protection Agency. This should go against green ETFs like VanEck Vectors Global Alternative Energy ETF (HM:GEX) and PowerShares Global Clean Energy PBD). Low carbon ETFs likeSPDR MSCI ACWI Low Carbon Target (NYSE:LOWC) ETF LOWC and iShares MSCI ACWI Low Carbon Target ETF CRBN may also be at risk (read: Yet Another Fossil-Fuel Free ETF Hits the Market).

Health Care

Trump offers to cut federal payments to home-health agencies and nursing homes by $80 billion over a decade and lower payments to hospitals by about $200 billion, including reductions for hospital-owned doctor’s offices, as per an article published on Bloomberg. Funds like SPDR S&P Health Care Services (NYSE:XHS) ETF XHS and iShares US Healthcare Providers ETF IHF may thus come under pressure.

Mexico

The budget proposal also asks for $18 billion for border security, including $1.6 billion to build about 65 miles of the wall in South Texas. “The request also calls for the department to hire 2,000 new Immigration and Customs Enforcement and 750 Border Patrol agents.” Trump’s steadfastness toward building a wall along the Mexico border may put a pressure on the trade relationship with Mexico and hurt iShares MSCI Mexico Capped ETF EWW (read: ETFs to Watch if U.S. Pulls Out of NAFTA).

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>