As President-elect Donald Trump's second term in the White House approaches, some investors are using exchange-traded funds (ETFs) to play the Trump trade, the post-election market rally. CFRA Research head of ETF data and analytics Aniket Ullal joins Wealth! Host Brad Smith to check in on the ETF market before Trump's inauguration.

"We've seen financials react very positively after the election of President-elect Trump. In particular, we've seen regional banks do very well" with ETFs like the SPDR S&P Regional Banking ETF (KRE), "which holds a bunch of regional banks, those have actually reacted very positively to the election. That's partly driven by expectations of looser regulation, expectations of the new administration being less hawkish on antitrust," Ullal tells the Wealth! team.

He adds, "[The] expectation of more M&A activity that's also driven ETFs that are focused on exchanges [and are] more capital markets related" like the iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI) and Invesco KBW Bank ETF (KBWB)

On the overall ETF ecosystem, Ullal says, "This year, for the first time, we may expect in a calendar year to see flows into ETFs in the US exceed $1 trillion. We're already past the record," which was set in 2021 at $911 billion. "We're already at $950 [billion], so we're already past the record [and] we now could pass a trillion," given ETF flows are seasonally strong in the final month of the year as investors and funds. rebalance their portfolios.

Ullal notes there has been some reaction in the ETF space to Trump's tariff rhetoric. Trump has said he would instate a 60% tariff on imports from China, which the strategist says has led to investors "trying to diversify away and look at ETFs that hold emerging markets like India, Taiwan, [Vietnam], and so on, that could benefit from some move away from China."

The former president has also indicated he plans to impose larger tariffs on Canada and Mexico, though Ullal says, "We've actually not seen as strong a reaction" to this rhetoric.

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This post was written by Naomi Buchanan.