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Counter Renewed Trade Tensions With 5 ETFs

Sanghamitra Saha
Updated
Unit Corporation has been struggling lately, but the selling pressure may be coming to an end soon.

Just as the public consultation period over trade ended on Sep 6, U.S.-Sino trade war tensions took centerstage. This is especially true given that President Donald Trump could levy 25% tariffs on an extra $200 billion of Chinese goods. The United States and China first targeted $50 billion worth of goods for import tariffs.

China is ready to hit back against any new tariff measures. To make matters worse, Trump mentioned on Sep 5 that the United States was not yet ready to negotiate with China, per Reuters (read: China's Likely Retaliation to US Tariffs & Its Impact on ETFs).

Things are not shaping well with Canada either for the United States. Till Sep 6, a few critical issues came in the way of the new NAFTA deal. The yet unresolved areas include dairy, protection for media companies, and policies pertaining to future trade disputes.

If the tensions escalate, there could be a slide in the global stock market. In July, the International Monetary Fund (IMF) projected that global growth will slow down by 2020 as “major economies are flirting with trade war.” By that timeframe, global growth could be lowered by as much as 0.5%, or about $430 billion will be cut out of the global GDP.

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This could derail the economies from their reform agenda. Bank of America Merrill Lynch estimates that only U.S. car tariffs at 25% could dent Euro area GDP by at least 0.3% (read: How Trade War & Other Issues Took the Sheen Off Platinum ETF).

BlackRock Vice Chairman believes that “the policies that are embraced by the U.S. administration around trade represent the biggest risk today to the global economy,” while he sees the Federal Reserve's ongoing pace of credit tightening as "healthy" and "necessary."

Given this uncertainty, there could be a surge in safety-seeking trading activities in the coming days. Investors thus could take refuge in the below-mentioned safe and defensive ETFs.

Invesco CurrencyShares Japanese Yen FXY

The product is designed to track the price of the Japanese yen, which is considered as a safe-haven asset. The fund charges 40 bps in fees. It was up 0.6% on Sep 6.

Invesco CurrencyShares Swiss Franc FXF

The product looks to track the price of the Swiss franc, another safe asset. It was up 0.6% on Sep 6 (read: Safe Haven ETFs to Buy Amid Extended Selloff).

AGFiQ US Market Neutral Anti-Beta (BTAL)

Investors, who want to shift their focus to low-beta stocks in this uncertain market environment, can consider adding BTAL ETF to their portfolio. This fund follows the Dow Jones U.S. Thematic Market Neutral Anti-Beta Index benchmark. The index identifies the lowest-beta stocks and goes long on them, while at the same time going short on the highest-beta stocks. The fund charges 75 bps in fees (read: Time to Buy Defensive ETFs?).

AGFiQ Hedged Dividend Income Fund: DIVA

The fund follows the INDXX Hedged Dividend Income Index. The index generates a high current yield and capital appreciation with risk similar to that of a corporate bond index. The index rebalances monthly by identifying the highest-dividend stocks as long positions, and the lowest-dividend stocks as short positions. The fund yields 4.92% annually. It added about 0.2% on Sep 6.

Fidelity MSCI Utilities ETF FUTY

If the market crashes, then U.S. treasury yields will likely retreat on a surge in safe-haven demand. And if bond yields nosedive, rate-sensitive sector utility will likely score higher, benefiting FUTY. The fund yields about 3.03% annually.

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FID-UTILITY (FUTY): ETF Research Reports
 
CRYSHS-JAP YEN (FXY): ETF Research Reports
 
CRYSHS-SWISS FR (FXF): ETF Research Reports
 
QS-HEDGED DIV (DIVA): ETF Research Reports
 
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Zacks Investment Research
 
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