While U.S. stocks have recently been decked by trade jitters and renewed recession fears, the U.S. remains the place to be for equity investors. Even with its May struggles, the S&P 500 is higher by 11.80% year-to-date, outpacing the MSCI EAFE Index by 340 basis points and the MSCI Emerging Markets Index by a margin of more than 3-to-1.
In the current market environment, investors may be seeking out defensive assets and rightfully so, but as the above returns indicate, there is something to be said for sticking with domestic stocks. Investors can up their level of patriotism with some “All-American ETFs.”
Some All-American ETFs have narrow focuses while others provide access to familiar industries and sectors. Not every All-American ETF is suitable for every investor, but there are plenty of funds in this genre that could prove useful for both adventurous and conservative market participants.
Here are some All-American ETFs for investors to consider.
NYSE Pickens Oil Response ETF (BOON)
Expense ratio: 0.85% per year, or $85 on a $10,000 investment.
The NYSE Pickens Oil Response ETF (NYSEARCA:BOON) is a quintessential All-American ETF. BOON is named for the famed oilman and energy investor T. Boone Pickens. It is issued by TriLine Index Solutions, an affiliate of BP Capital Fund Advisors. BP Capital is Pickens’ investment firm. There are plenty of energy ETFs on the market today, but not all as levered to upside in oil prices as investors may think.
BOON “includes the suppliers of energy as well as companies that benefit from oil and gas consumption and increasing demand/throughput,” according to the issuer. “The price of oil has the potential to impact not just energy companies, but also many other industries as well, and the NYSE Pickens Oil Response ETF stock seeks to benefit from this reality.”
With the U.S. pumping oil at near record levels and becoming one of the world’s top exporters of crude, BOON fits the bill as an All-American ETF, but it is not a dedicated energy fund. While 44.1% of the fund’s holdings hail from the energy patch, BOON also allocates 51.1% of its weight to the industrial and materials sectors.
BOON’s holdings are screened based on three-month to five-year correlations to Brent crude, the global oil benchmark. That explains some the fund’s recent weakness, but the fund is a credible All-American ETF worth considering when oil prices rebound.
iShares U.S. Aerospace & Defense ETF (ITA)
Expense ratio: 0.43%
It is a source of some controversy, but the U.S. is the world’s largest seller of military-grade weapons, making the iShares U.S. Aerospace & Defense ETF (CBOE:ITA) relevant in the conversation of All-American ETFs. The $4.91 billion ITA tracks the Dow Jones U.S. Select Aerospace & Defense Index and holds 34 stocks.
Data confirm that arms sales are big business for Uncle Sam and many of the companies residing in ITA and rival aerospace and defense ETFs.
The State Department “previously announced that FY18 brought in $55.66 billion in foreign military sales, an uptick of 33 percent over FY17’s $41.93 billion,” reports Defense News.
That trend is continuing as highlighted by the White House recently bypassing Congress to sell $8 billion US-made weapons to Saudi Arabia and the United Arab Emirates.
ITA may be a controversial All-American ETF, but the fund delivers for investors. Over the past three years, ITA is up almost 70%, easily outpacing the S&P 500 and broader industrial ETFs over that span.
Pacer Benchmark Industrial Real Estate SCTR ETF (INDS)
Expense ratio: 0.60%
Real estate is one of the smallest sectors in the S&P 500, but one of the sector’s perks at times when market volatility rises due to geopolitical headline risk is that U.S. real estate companies derive substantial portions of their revenue here in the states. That is to say this is not an export-heavy sector and the Pacer Benchmark Industrial Real Estate SCTR ETF (NYSEARCA:INDS) is a legitimate All-American ETF.
Additionally, INDS has credibility as an All-American ETF for another reason: the fund is arguably the best real estate play on shifting consumer tastes. As seasoned investors know, consumer spending is one of the primary drivers of the U.S. economy.
INDS components are industrial real estate investment trusts (REITs), a corner of the real estate space that is often under-owned by traditional REIT ETFs. Due to the soaring real estate needs of companies engaged in e-commerce and online retail, industrial REITs are delivering for investors this year.
“How consumers shop and receive purchases has changed considerably over the past several years. This has been a direct result of the growing on-demand economy, where overnight—and in some cases same-day—delivery is increasingly becoming the norm,” said FTSE Russell in a recent note. “The trend has presented the need for space close to densely populated areas where consumers are more concentrated, prompting REITs to introduce logistics facilities in urban centers. This has been a key area of growth for Industrial REITs, largely supporting the sector’s recent rally.”
Todd Shriber does not own any of the aforementioned securities.