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4 Safe Havens From the Trade War

Tyler Craig

The ranks of trade war victims are growing with every Trump tweet. Friday’s bloodbath and this morning’s upside reversal is simply the latest volatility seizure suffered by stocks. If the heightened uncertainty has left you wounded, you’re in good company.

Today we’ll offer up four safe stocks to buy that have provided ample shelter from the storm. They all boast significant year-to-date gains, low volatility, and rock-solid technical trends. Furthermore, their status as safety plays was reaffirmed by their behavior on Friday.

Two of them shot to the moon. The other two fell but much less than the S&P 500.

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Let’s take a closer look at these safe stocks.


Utilities SPDR (XLU)

Source: ThinkorSwim

The Utilities SPDR (NYSEARCA:XLU) notched a new all-time high Friday at $62.46. The morning strength pushed its year-to-date gains to 18.4% before XLU finally succumbed to broad market selling into the close. On the technical front, it has a consistent uptrend complete with rising 20-day, 50-day, and 200-day moving averages.

Aside from its beautiful price chart, XLU has two other dynamics going for it. First is its juicy 3.16% dividend yield. Now that the Fed has begun what could be a series of rate cuts, high dividend-paying stocks are becoming increasingly attractive. Second is its low volatility, defensive nature. Historically, the utility sector has held up well during recessions and offers lower day-to-day volatility than other sectors.

Buy XLU and relish in the slow-moving, income-producing ride.


iShares US Real Estate ETF (IYR)

Source: ThinkorSwim

The iShares US Real Estate ETF (NYSEARCA:IYR) shares many characteristics with XLU, including the above-average dividend yield and low volatility. Its current dividend yield is 3%, and at Friday’s peak, its year-to-date gains were 24%.

IYR is one of the most liquid real estate investment trusts in the market and has listed options if derivatives are your instrument of choice. It offers a diversified basket of over 100 real estate companies like Public Storage (NYSE:PSA), American Tower Corp (NYSE:AMT) and Equinix (NASDAQ:EQIX). All remain attractive safe stocks to buy as alternatives to a pure sector bet.

To offer context on volatility for IYR, its beta is a lowly 0.59. XLU was even lower at 0.24.

Falling interest rates and investors desire for volatility reduction should continue to boost this safe stock for months to come.


SPDR Gold Trust (GLD)

Source: ThinkorSwim

For traders looking to sidestep stocks altogether, I suggest looking to gold. Its safe-haven status has been questioned throughout the years, but there’s no doubt it’s been an effective diversifier in 2019. Year-to-date the yellow metal is up 19%, putting it on pace for one of its best years over the past decade.

Its beta is -0.21, which reveals its inverse correlation to stocks as well as its extremely low volatility. Ever since June’s breakout, GLD has acted extremely well on the technical front. Buyers have gobbled up every dip and chased every breakout. Friday’s market beatdown brought buyers flocking into gold, reaffirming its popularity among safe stock seekers.

GLD should continue to shine bright.


iShares Barclays 20+ Year Treas.Bond (TLT)

Source: ThinkorSwim

No list of safe stocks or safe investments would be complete without including treasury bonds. Given their almost perfect inverse correlation to stocks in recent months, they’ve been a perfect yin to the market’s yang. The iShares Barclays 20+ Year Treas.Bond (NASDAQ:TLT) is up 19% year-to-date has one of the best-looking uptrends on the Street. The 20-day, 50-day, and 200-day moving averages are all stacked atop each other in bullish fashion.

Last week’s pullback offered a textbook buy the dip opportunity that ended with Friday’s pole vault. Until stocks can right the ship, expect the gains to keep on coming for TLT.

As of this writing, Tyler Craig held bearish options positions in TLT. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.

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