As Trade War Heats Up, These ETFs Offer A Safe Harbor For Investors

Mounting global trade tensions are leading to sharp market fluctuations as investors are scrambling for ways to protect their portfolios.

The U.S. has imposed tariffs on major trade partners, including Mexico, Canada, and China, leading to economic uncertainty.

As a result, ETFs have emerged as a safe option for those looking to hedge against volatility while maintaining diversified exposure to various asset classes.

Also Read: 5 ETFs That Beat Market Turmoil With Gains Last Week

SPDR Gold Shares GLD: Gold has long been a preferred asset during market turmoil. The SPDR Gold Shares ETF GLD provides direct exposure to gold, which often rises with the rise of uncertainties, making it a strong hedge against economic instability. The ETF price has grown 42.88% in the past year.

Invesco S&P 500 Low Volatility ETF SPLV: For those who want equity exposure with reduced volatility, the Invesco S&P 500 Low Volatility ETF selects stocks with historically lower price fluctuations, aiming for steadier performance. The fund boasts a 1-year price return of 13.72%.

Vanguard Consumer Staples ETF VDC: Consumer staples remain resilient in uncertain economic conditions, as everyday essentials will continue to be in demand. The Vanguard Consumer Staples ETF includes key players like Procter & Gamble PG and Coca-Cola KO, offering a defensive strategy against economic downturns.

Market Turbulence from the Trade War

The recent imposition of tariffs by the U.S. on major trade partners—Mexico, Canada, and China—has injected significant uncertainty into the markets. With 25% tariffs on Canadian and Mexican imports and a 10% levy on Chinese goods, equities initially reacted negatively. Although a temporary pause on tariffs for Mexico and Canada provided a brief market recovery, it is widely believed that Trump will go ahead with the policies one day or the other.

In another step in his trade policy overhaul, Reuters reported that on Feb. 9, Trump said he will introduce fresh 25% tariffs on all steel and aluminum imports into the U.S. These tariffs will add to the existing metals duties.

Strong retaliatory tariffs from China, and sanction plans on U.S. goods by Canada and Mexico are adding to the nail-biting situation.

Additionally, with the Fed keeping interest rates unchanged in their recent meeting led investors to lower their expectations for lower rates, throwing the market into more uncertainty.

According to the CME FedWatch Tool, the Fed has a 91.5% probability of keeping the rates unchanged at 4.25-4.5% in March, while there’s an 8.1% chance that the Fed cut the rate to 4%-4.25% in its March meeting.

While trade conflicts can cause market swings, investors can mitigate risks by allocating capital to ETFs that focus on keeping investors’ money safe. Whether through gold, Treasuries or defensive equities, these funds offer more opportunities to diversification and manage risks as global trade policies evolve.

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