Trump's Afghanistan Rhetoric Helps/Hurts These ETFs

After the North Korea issue, geopolitical risks heightened again, with Trump's Afghanistan speech. President Donald Trump recently commented that as many as 4,000 more U.S. troops will be employed to handle Afghanistan’s terror issue and that he will launch a political arrangement with the Taliban. The President also said that a quick removal of U.S. troops from Afghanistan may once again attract terrorists to fill that gap.

As per an article published on Bloomberg, the comments mark a shift from Trump’s presidential campaign. During the campaign, Trump only approved the necessity of U.S. interference in Afghanistan’s terrorism issue. In fact, he hinted at the more crucial need for abandoning military engagement in that region and deploying resources rather at the domestic land.

At the start of the month, Donald Trump pledged that North Korean premier Kim Jong-Un’s nuclear threats will be met with “fire and fury.” Increasing tensions between the two regions — the U.S. and North Korea and recent comments about Afghanistan have pushed up defense and aerospace stocks (read: ETFs to Profit from US-North Korea Tensions).

Moreover, the earnings season has also been quite impressive for companies in this sector. The sector came up with 90% of earnings and 70% revenues beat, which is pretty encouraging (read: Q2 Earnings Effect: 4 Must-See ETF Charts).

ETF Winner

Defense

Since stocks like Boeing (NYSE:BA) (up over 1.7%), Northrop Grumman Corporation (NYSE:NOC) (up about 1.9%), General Dynamics Corporation (NYSE:GD) (up about 1.3%), Raytheon Company (NYSE:RTN) (up about 1.4%) and Lockheed Martin (NYSE:LMT) (up about 1%) gained post Trump’s Afghanistan comments, aerospace and defense ETFs like iShares US Aerospace & Defense ETF (HM:ITA) , PowerShares Aerospace & Defense Portfolio PPA and SPDR S&P Aerospace & Defense ETF (LON:XAR) gained on August 22, 2017.

ITA put about 11.1% weight in Boeing while the other above-mentioned stocks take about 27% of the fund. XAR invests about 16.3% of its weight in Boeing, Raytheon, Lockheed Martin and Northrop Grumman. About one-third of the PPA portfolio is invested in the above-mentioned stocks. As a result, on August 22, ITA, PPA and XAR were up about 1.2%, 1.1% and 1.3%, respectively. ITA and PPA added about 0.5% each after hours.

ETF Loser

Pakistan

Pakistan’s stock prices on the Karachi Stock Exchange dropped over 2% on Tuesday as Donald Trump issued warnings to Pakistan. In his speech, Trump acknowledged Pakistan as a “safe haven” for terrorist organizations. The comments left investors uneasy about the future of U.S.-Pakistan relations. Global X MSCI Pakistan ETF (AX:PAK) was in the red on August 22.

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 >>