In yet another attempt to bolster the US economy, President Obama and his administration used the long weekend to unveil a public works plan that emphasizes on transportation and infrastructure, potentially influencing the iShares Dow Jones Transporation Average (IYT), the PowerShares Dynamic Building & Construction Portfolio (PKB) and the PowerShares DB Base Metals (DBB).
This latest plan is estimated to cost as much as $50 billion over the next six years and includes rebuilding nearly 15,000 miles of road, constructing nearly 4,000 miles of railway, revamping airport runways and moderninzing the air traffic control system. Additionally, President Obama called for an “infrastructure bank” which would focus on funding regional transportation upgrades.
According to the White House, this new public works plan is not expected to add to an already ballooning deficit over time and is expected to be funded through the elimination of tax deductions for oil and gas companies. Furthermore, this plan comes at a time when the US is faced with the prospect of Democrats losing control of Congress in the November elections and a series of mixed economic reports, including an increase in the nation’s overall unemployment rate.
As mentioned earlier, some ETFs that are likely to be influenced by Obama’s plan include:
- iShares Dow Jones Transportation Averahe (IYT), which is a diversified play on transports and includes Union Pacific Corporation (UNP) and Norfolk Southern (NSC) in its top holdings.
- PowerShares Dynamic Building & Construction Portfolio (PKB), which includes holdings that could benefit from increased infrastructure spending like Fluor Corporation (FLR) and Owens Corning (OC).
- PowerShares DB Base Metals (DBB), which holds futures contracts in copper, aluminum and zinc, all metals expected to see increased demand with increased infrastructure spending.
If playing the aforementioned equities, it is important to be mindful of the risks involved. To help protect against these risks the use of an exit strategy is important. Such a strategy can be found at www.SmartStops.net.
Disclosure: No Positions