Donald Trump’s Executive Orders: ETF Bulls and Bears

Paris Climate Agreement

Donald Trump issued an executive order to withdraw the U.S. from the Paris Climate Agreement, a global pact aimed at limiting global warming to below 2 degrees Celsius by reducing greenhouse gas emissions.

For ETFs, this is significant as several funds are marketed as “Paris-aligned,” meaning they focus on investments in companies that adhere to climate-friendly practices and have targets aligned with the agreement’s goals.

These ETFs aim to overweight firms transitioning toward net-zero emissions while underweighting or excluding high emitters.

The largest such fund, the iShares Paris-Aligned Climate MSCI USA ETF

, currently managing $1.9 billion in assets, has already faced $68 million in net outflows over the past month.

The likely consequence? A chilling effect on ETF issuers considering launching similar Paris-aligned products, as diminished policy support may weaken investor interest in this niche segment.

Diversity, Equity, & Inclusion (DEI)

Donald Trump has long been vocal about his opposition to DEI initiatives, and several of his executive orders reflect this stance.

Key measures include placing all DEI employees in federal agencies on paid administrative leave, canceling DEI-related training programs, and requiring employees to report any “disguised” diversity efforts.

The fallout has already begun in the ETF world. For example, the Calvert US Large-Cap Diversity, Equity and Inclusion Index ETF

has experienced $7 million in net outflows over the past month, leaving it with just $22 million in assets under management.

DEI-focused ETFs remain a niche category, with the largest being the SPDR MSCI USA Gender Diversity ETF

. However, given the political headwinds and dwindling investor interest, it’s reasonable to expect fewer launches in this space moving forward.

Prescription Drug Prices

One notable Biden-era regulation rescinded by a Trump executive order was the cap on prescription drug prices, originally set by the Inflation Reduction Act.

While this reversal is likely to increase costs for the average American, it may provide a tailwind to pharmaceutical companies benefiting from greater pricing power.

By extension, ETFs like the SPDR S&P Pharmaceuticals ETF

could stand to gain. In fact, it has already seen $7 million in net inflows over the past month.

Some traders are also making leveraged bets on the sector, as evidenced by the growth of the Direxion Daily Pharmaceutical & Medical Bull 3X Shares ETF

, which added $3 million in assets to reach $16 million in AUM.

Artificial Intelligence (AI) Infrastructure

What really grabbed headlines was Trump signing the “Stargate” initiative into law, a sweeping $500 billion investment aimed at building AI infrastructure.

This includes funding for advanced semiconductor manufacturing, data center construction, quantum computing, and expanding AI research hubs across the United States.

ETFs have been hotly anticipating a move like this, and the market responded accordingly. The popular Global X Artificial Intelligence & Technology ETF

swelled to $2.8 billion in assets under management (AUM), taking in $117 million in net inflows over the last month.

However, I’m more closely watching hybrid AI and REIT ETFs, such as the Global X Data Center REITs & Digital Infrastructure ETF

. This fund currently sits at $165 million in AUM and saw $12 million in inflows over the last month.

National Energy Emergency

Trump’s promise to “drill, baby, drill” materialized with the declaration of a “national energy emergency.” This executive action grants the administration broader authority to expedite approvals for fossil fuel exploration and production while sidelining renewable energy sources like wind and solar.

The immediate beneficiaries of this policy are broad U.S. energy ETFs. The Vanguard Energy ETF

saw $39 million in inflows over the past month, while the downstream-focused VanEck Oil Services ETF

OIH

+2.76%

recorded an even more substantial $81 million.

However, the standout performer was the midstream-focused Alerian MLP ETF

, which attracted $109 million in inflows, reflecting strong investor enthusiasm.

The policy’s scope extends beyond oil and gas, encompassing nuclear power and critical minerals. The VanEck Uranium+Nuclear Energy ETF

experienced a massive $113 million in inflows, swelling its AUM to $983 million.

Finally, the VanEck Rare Earth/Strategic Metals ETF

, one of the few ETFs dedicated to critical minerals, saw a modest but notable $2 million bump.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.