The blue wave is boosting a few key stock groups.
Infrastructure and clean energy stocks have been on the rise since the presidential election, with the rallies intensifying as Congress confirmed President-elect Joe Biden’s victory and the Senate runoffs in Georgia brought the Senate under Democratic control.
That’s because Congress’ new makeup “substantially” raises the odds of favorable policies being put in place on both fronts, Jay Jacobs, senior vice president and head of research and strategy at Global X ETFs, told CNBC’s “ETF Edge” on Monday.
“Infrastructure has been at the top of Joe Biden’s plan since the beginning. He’s had a $2 trillion plan that’s going to invest in roads, highways, airports, ports as well as digital infrastructure and clean tech,” Jacobs said.
“This has been a key pillar of Joe Biden’s plan for economic revival. Now he has the tools to do that with Democrats owning the executive branch and the legislative branch.”
The Global X U.S. Infrastructure Development ETF (PAVE), has climbed nearly 28% since Election Day and boasts more than $952 million in net assets. United Rentals, Trimble, Fastenal, Rockwell Automation and Eaton Corporation are its top holdings.
“We’ve seen about $500 million in inflows into our PAVE ETF as investors have started to orient their portfolios towards this theme as they start to see the chances of it accelerating and really taking off,” Jacobs said.
Clean energy-based exchange-traded funds have also taken off since the election. Global X’s Lithium & Battery Tech ETF (LIT) has surged over 58% since Nov. 3 and the catalysts are only growing in number, Jacobs said.
“It’s important to remember this is a global theme, so it’s not just being driven by the United States or even at the federal level,” he said.
Even if Biden can’t make good on his stated plans to rejoin the Paris Climate Agreement or reach carbon neutrality by 2050, there’s much more driving this theme, Jacobs said.
“You look at states like California, which have said by 2035 they want to be carbon-neutral. You look at countries like the U.K. and France that are also looking at 2050,” he said. “China, the world’s largest car market, is trying to reach carbon neutrality as well. So, this is a global theme being powered by a lot of different regulatory bodies who are all very quickly shifting away from internal combustion engines to lithium and battery technology and electric vehicles.”
LIT has over $2.6 billion in net assets. Its top five holdings are Albemarle, Ganfeng Lithium, BYD Co., Tesla and Samsung SDI.
PAVE climbed more than 1% on Tuesday to a new all-time high. LIT rose by nearly 2%.
