President Barack Obama is scheduled to address the nation from the Oval Office on Tuesday night, a setting historically reserved for speeches made during times of crisis. With the massive oil spill in the Gulf of Mexico reaching an “inflection point,” the president will aim to silence critics who have bashed the White House for being too passive in its handling of the worst oil spill in U.S. history.
Much of the address is expected to focus on the government’s efforts to hold BP accountable for the spill cleanup and compensation of those impacted by drilling moratoriums, polluted fishing water, and quiet tourist seasons. But the speech is also expected to address larger issues facing the U.S. energy industry, and could outline far-reaching reforms that change the way oil companies do business and domestic companies power their operations. Joining environmentalist groups and Gulf Coast residents in rapt attention to the address on Tuesday night will be Wall Street, as investors scramble to analyze the impact of the administration’s proposed policies on the domestic energy industry.
Markets have always reacted to Washington’s agendas, but the attention paid by Wall Street to the legislative environment has spiked since the beginning of the most recent recession. The last several years have seen unprecedented government ownership of U.S. corporations, as well as an increased willingness to implement regulatory changes that drastically alter the business environment. Below, we highlight five ETFs that will be in focus following Obama’s Oval Office address:
- Dow Jones U.S. Oil Equipment & Services Index Fund (IEZ): With the future of the offshore drilling industry hanging in the balance, companies that provide services to Big Oil have seen huge price swings in recent weeks. Tuesday’s speech figures to shed some light on the administration’s plans to regulate the oil industry and end the “cozy relationship” that has been identified as a contributing factor in the current disaster.
- iShares MSCI United Kingdom Index Fund (EWU): This ETF may be a somewhat unexpected addition to this list, but the significant weighting given to BP (EWU’s second largest holding at about 8% of assets) means that EWU could swing as the events of coming days unfold. BP executives are expected to meet with Obama this week to discuss a proposed escrow account to pay claims of economic and environmental damage, as well as the extent of BP’s liability in the matter.
- PowerShares WilderHill Clean Energy Portfolio (PBW): As the Obama administration has pushed through health care reform and moved towards overhauling the financial sector as well, the passage of legislation to reduce the country’s dependence on fossil fuels has been pushed to the back burner. But aides have indicated that Obama plans to go well beyond the direct response to BP in his address, focusing on the need to develop new energy sources. Clean energy ETFs have been battered this year as cash-strapped governments have pulled back subsidies on which the industry depends. But a renewed focus on policies designed to boost the alternative energy sector could give PBW and other clean energy funds a boost.
- Market Vectors Nuclear Energy ETF (NLR): Some analysts anticipate that Obama will outline plans for expanding the reach of nuclear power tonight, a move that could give a boost to NLR. Expansion of the country’s nuclear industry is one plan that enjoys bipartisan support; Arizona Senator John McCain said earlier this year that “we need to build 100 nuclear power plants in the next 20 years” (see Nuclear ETFs: Ready To Surge?).
- United States Natural Gas Fund (UNG): Another potential beneficiary from a renewed focus on developing alternatives to crude oil could be natural gas, a clean burning fuel that is plentiful within the U.S. Despite being hyped as the “fuel of the future,” natural gas prices have plummeted in recent years as supplies have surged. Natural gas prices won’t hinge on Obama’s words alone, but the content from the president’s speech could impact UNG slightly.
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Disclosure: No positions at time of writing.