What we thought would be a productive, bipartisan 1Q22 looks to be stretching into a 1H22 story. Democrats’ credible fears of midterm losses certainly provide incentive on their side, but war and inflation have both parties engaged in domestic sector investment. We’ve been focused on cybersecurity, defense, green and cleaner energy, infrastructure, and semiconductors for a few months. 22V’s technical analyst, John Roque, scored related ETFs and indices after Friday’s close.
John’s scoring system validates these groups as beneficiaries of Washington policy. Of course, other factors not at work in our policy analysis likely contribute but there is no mistaking these are hot commodities – so to speak. We use five proxies for this exercise: BUG, MXWOPALI, XAR, SOX, and IPAVE. None score ‘weak’ and three are ‘good or strong’ according to John’s work; all show YTD improvements vs 1YR performance. John has constituent names for BUG, SOX, and XAR which he or we will happily share.
Infrastructure and defense score at the top (4s). What had been uncertainties about federal funding outcomes are behind these groups, but we believe the President’s budget and on-going war will provide additional tailwinds. The semiconductors story is coming together with confirming action last week in the Senate setting up votes today for it to move to conference committee with the House. The legislation underscores renewed public/private long-term investment to address vulnerabilities revealed by the pandemic’s supply chain wrecking ball and national security concerns. Senator Joe Manchin (D-W.Va.) yesterday gave another nudge to green energy prospects by indicating he could support some of President Biden’s 2021 proposal. We continue to believe physical war in Ukraine leads to greater cyberwar offensives against the US. Regrettably, we likely are just another incident away from BUG and related securities receiving new attention.
Just a quick reminder, John is hosting a March 30 dinner sure to be a chartist’s delight. Oh, and gastronomic sustenance will also be provided. Contact Mr. Roque ([email protected]) or your 22V sales ([email protected]) representative for details (and charts).
