Tariffs, Trump, and Turmoil: ETFs to Escape U.S. Uncertainty
With the U.S. on shaky ground, gold and global plays shine.
The first 100 days of President Trump’s second term have been incomparable to those of his previous presidential peers – or his first term. As noted by Bloomberg, the S&P 500 Index is down about 8% since his inauguration and on track for its worst run during a president’s first 100 days since Gerald Ford in 1974, following Richard Nixon’s resignation.
Against the backdrop of his administration’s aggressive tariff policy that has stoked market uncertainty, the performance of U.S. equities relative to other markets and asset classes has been noticeable. As gleaned from the following chart, gold has been the top-performing asset class through the first four months of the year, with investors and institutions allocating to it as a hedge against market uncertainty. As noted by the World Gold Council, investment flows strongly contributed to the rally in the asset.
As has been well documented, the uncertainty arising from the U.S. has resulted in a pivot to other markets, most notably Europe. While the U.S. has instituted remarkably high tariffs on Chinese goods, at this current juncture, the world’s second-largest economy (i.e., China) remains steadfast in its position not to buckle to the U.S.’s threats.
President Xi is instead seeking to strengthen regional alliances and repair ties with the European Union, positioning China as the more reliable partner. From a Canadian perspective, as noted in a Bloomberg report, Chinese refiners are importing record amounts of Canadian crude after slashing purchases of US oil by roughly 90%. This is due to a pipeline expansion in Western Canada that opened less than a year ago, which has presented China and other East Asian oil importers with expanded access to the vast crude reserves in Alberta’s oilsands region.
Navigate Uncertainty with Diversification
A diversified approach can be a sound course of action for investors seeking to navigate the uncertainty in the current market landscape. The Vanguard FTSE Developed All Cap ex U.S. Index ETF (Tickers: VDU/VDF) provides exposure to developed markets, excluding the U.S, and tracks the FTSE Developed All Cap ex US Index. The Index invests directly or indirectly primarily in large-, mid, and small-capitalization stocks of companies.
For investors who desire to have some exposure to gold, the iShares Gold Bullion ETF (Ticker: CGL) and Purpose Gold Bullion Fund (Tickers: KILO/KILO.B/KILO.U) are examples of funds that provide exposure to the asset class. The former seeks to replicate the price of gold bullion, while the latter invests in and holds primarily pure, refined and unencumbered gold bullion on a long-term basis in 1,000 grams London Good Delivery Bars, providing investors with a secure, convenient, low-cost alternative for investors interested in holding an investment in gold bullion.
For investors interested in gold exposure, CBOE’s ETF Screener can facilitate identifying other Gold ETFs (Commodity) tracking the metal’s price and Gold Miners ETFs (Equities) focused on mining stocks.
Finally, for Canadian investors seeking exposure to Chinese equities, the iShares China Index ETF (Ticker: XCH) and the BMO MSCI China ESG Leaders Equity Index ETF (Ticker: ZCH) provide exposure to the region.
XCH tracks the FTSE China 50 Index, which comprises the 50 largest and most liquid Chinese stocks, while ZCH tracks the MSCI China ESG Leaders Index, which reflects the performance of securities that have been assigned higher ESG ratings by MSCI relative to their peers and targets 50% of the market capitalization within each sector.
Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.
