ETFs To Avoid Post-Debt Ceiling Debate

Finally. Mercifully. The gang on Capitol Hill narrowly beat the deadline to extend the $14.3 trillion U.S. debt ceiling. The House passed the measure on Monday and the Senate is scheduled to vote on it today. The news is a welcome relief, but there are no guarantees stocks and other riskier assets will suddenly ascend higher. In fact, it may be easier to spot the losers than it is to identify the winners now that most contentious debt ceiling debate in recent memory is close to being put to bed. Here are some of the ETFs you'll want to avoid when the debt ceiling is officially extended. 1) PowerShares Dynamic Aerospace & Defense Portfolio PPA: Don't be deceived by that meager loss Boeing BA posted on Monday. One look at PPA's chart tells the story. As Bloomberg reports, the Defense Department could see a $325 billion haircut to its budget over the next decade. That's reason enough to steer clear of PPA and its constituents. 2) iShares Dow Jones U.S. Healthcare Providers Index Fund IHF: Again, just look IHF's chart because it tells the story. Monday's plunge underscores how deeply investors are concerned about potential cuts to Medicare and Medicaid. In reality, substantive cuts to those two programs are going to be hard to come by, but the perception is companies like UnitedHealth UNH and Humana HUM, just two of IHF's top-10 constituents, are vulnerable in the near-term. Biotech, pharma and medical device makers are now the better health care plays. 3) iShares Cohen & Steers Realty Majors Index Fund ICF: ICF makes the list due to the fact that some of its constituents come with the label “health care REIT.” While the ETF's exposure to this sub-sector of the REIT universe isn't excessive, it's enough to present a near-term headwind as Uncle Sam looks for anyway he can find to pinch pennies. A violation of support at $72 is a sell signal. 4) SPDR S&P Homebuilders ETF XHB: While XHB isn't a pure play on homebuilders, it's home to enough of those names and companies such as Bed Bath & Beyond BBBY and Williams Sonoma WSM that are intimately tied to the housing market that this is one to steer clear of. Below $16.50, XHB is vulnerable to a prolonged downside move and we now know this much: The government will probably not be providing any more bailouts for the housing market anytime soon.