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Safe Haven ETFs to Buy on Trump's Tariff Plans

Zacks Equity Research
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Safe-haven funds have been gaining investor attention, owing to a multitude of events. Geopolitical risks have driven these funds throughout 2017. However, worries relating to North Korea seem to be decreasing, as that country’s officials have reportedly stated their leader Kim Jong-Un’s willingness to scrap its nuclear program, in exchange for security guarantees from the United States.

 

Lately, President Donald Trump’s tariff plans have sparked fears of a trade war and has been driving investors toward safe haven funds (read: Country ETFs to be Impacted by Trump's Tariff Plans).

 

Imminent Trade War?

 

Trump’s plans of implementing 25% tariff on steel imports and 10% tariff on aluminum imports weighed on the markets and made investors re-evaluate their investment decisions. “When a country is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump tweeted.

 

China has already started evaluating retaliatory measures by looking at trade of soybeans and other farm products with the United States, which might weigh on American famers and ultimately on Trump’s support among rural Americans and Republican strongholds. Moreover, China is not the only country ready with probable attacks in case Trump’s tariffs come into effect. The European Union (EU) has also hinted at retaliatory tariffs on U.S. imports if Trump administration goes ahead with its plans (read: Is Europe Swinging toward the Right? ETFs in Focus). 

 

The EU aims to apply a 25% retaliatory tax on 2.8 billion euros ($3.5 billion) worth of American goods. To this, Trump responded, “They can do whatever they’d like, but if they do that, then we put a big tax of 25 percent on their cars - and believe me they won’t be doing it very long.”

 

Recent events and exchanges between world leaders indicate that the stage for a trade war has been set. As a result, investors are looking to hedge their portfolios and reallocate some assets to safe havens (read: 5 ETFs to Buy in March & Forget Trade War, Inflation Fears). 

 

Japanese yen and Swiss franc funds gain a lot of traction in periods of rising geopolitical risks. 

 

CurrencyShares Japanese Yen Trust FXY

 

This ETF seeks to provide exposure to the Japanese yen.

 

The fund has AUM of $154.5 million and charges a fee of 40 basis points a year. It has returned 6.7% in a year. As such, FXY carries a Zacks ETF Rank #3 (Hold), with a Medium risk outlook.

 

CurrencyShares Swiss Franc FXF

 

This ETF seeks to provide exposure to the Swiss franc.

 

It has AUM of $155.6 million and charges a fee of 40 basis points a year. It has returned 6.3% in a year. As such, FXF carries a Zacks ETF Rank #3, with a High risk outlook.

 

Gold funds are also considered the go-to investment vehicles at times of immense market uncertainty, given their low correlation to the overall equity markets.

 

SPDR Gold Shares ETF GLD

 

This fund offers physical exposure to gold. It seeks to track the performance of the gold bullion and might turn out to be a cost-efficient way of gaining exposure to the commodity even after accounting for the fund’s expenses.

 

It has AUM of $35.4 billion and charges a fee of 40 basis points a year. It has returned 8.4% in a year. As such, GLD carries a Zacks ETF Rank #3, with a Medium risk outlook.

 

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Safe-haven funds have been gaining investor attention, owing to a multitude of events. Geopolitical risks have driven these funds throughout 2017. However, worries relating to North Korea seem to be decreasing, as that country’s officials have reportedly stated their leader Kim Jong-Un’s willingness to scrap its nuclear program, in exchange for security guarantees from the United States.

Lately, President Donald Trump’s tariff plans have sparked fears of a trade war and has been driving investors toward safe haven funds (read: Country ETFs to be Impacted by Trump's Tariff Plans).

Imminent Trade War?

Trump’s plans of implementing 25% tariff on steel imports and 10% tariff on aluminum imports weighed on the markets and made investors re-evaluate their investment decisions. “When a country is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump tweeted.

China has already started evaluating retaliatory measures by looking at trade of soybeans and other farm products with the United States, which might weigh on American famers and ultimately on Trump’s support among rural Americans and Republican strongholds. Moreover, China is not the only country ready with probable attacks in case Trump’s tariffs come into effect. The European Union (EU) has also hinted at retaliatory tariffs on U.S. imports if Trump administration goes ahead with its plans (read: Is Europe Swinging toward the Right? ETFs in Focus). 

The EU aims to apply a 25% retaliatory tax on 2.8 billion euros ($3.5 billion) worth of American goods. To this, Trump responded, “They can do whatever they’d like, but if they do that, then we put a big tax of 25 percent on their cars - and believe me they won’t be doing it very long.”

Recent events and exchanges between world leaders indicate that the stage for a trade war has been set. As a result, investors are looking to hedge their portfolios and reallocate some assets to safe havens (read: 5 ETFs to Buy in March & Forget Trade War, Inflation Fears). 

Japanese yen and Swiss franc funds gain a lot of traction in periods of rising geopolitical risks. 

CurrencyShares Japanese Yen Trust (FXY)

This ETF seeks to provide exposure to the Japanese yen.

The fund has AUM of $154.5 million and charges a fee of 40 basis points a year. It has returned 6.7% in a year. As such, FXY carries a Zacks ETF Rank #3 (Hold), with a Medium risk outlook.

CurrencyShares Swiss Franc (FXF)

This ETF seeks to provide exposure to the Swiss franc.

It has AUM of $155.6 million and charges a fee of 40 basis points a year. It has returned 6.3% in a year. As such, FXF carries a Zacks ETF Rank #3, with a High risk outlook.

Gold funds are also considered the go-to investment vehicles at times of immense market uncertainty, given their low correlation to the overall equity markets.

SPDR Gold Shares ETF (GLD)

This fund offers physical exposure to gold. It seeks to track the performance of the gold bullion and might turn out to be a cost-efficient way of gaining exposure to the commodity even after accounting for the fund’s expenses.

It has AUM of $35.4 billion and charges a fee of 40 basis points a year. It has returned 8.4% in a year. As such, GLD carries a Zacks ETF Rank #3, with a Medium risk outlook.

Want key ETF info delivered straight to your inbox?

 

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>

 

 


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CRYSHS-JAP YEN (FXY): ETF Research Reports
 
GOLD (LONDON P (GLD): ETF Research Reports
 
CRYSHS-SWISS FR (FXF): ETF Research Reports
 
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