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Safe Haven ETFs to Evade Geopolitics & Weak Economic Data

Sanghamitra Saha

The global investing world, especially risky assets, may waver in the near term on a host of factors including the global ransomware attack that affected over 200,000 computers in over 150 countries and a missile test by North Korea. To add to this, weaker-than-expected retail sales and inflation in the U.S. for the month of April are also likely to curb investors’ risk appetite.

The U.S. core consumer price index (CPI) grew 1.9% on a year-over-year basis in April, marking the smallest gain since October 2015 and falling shy of the economists’ expectation of 2% growth. Retail sales rose 0.4% sequentially in April, lower than expectations of 0.6%.

Thanks to this muted improvement in key economic indicators, traders now expect about a 49% chance of two more rate hikes rest of this year, lower than 54% expectations that hovered ahead of the release of data on May 12, as per the source. If this was not enough, China's factory output, retail sales and investments rose lower than expected as authorities launched a clampdown on the country’s bulging financial leverage, as per Bloomberg.

Given these woes, risk-averse investors may tread cautiously and dump stocks in favor of safe haven assets to protect their portfolio from capital erosion. Below we have highlighted three safe haven ETFs that investors can consider adding to their portfolio in the current volatility. These products are likely to gain should the turmoil worsen and volatility in the market continue to escalate.

Treasury Bonds
iShares 20+ Year Treasury Bond ETF TLT
Though U.S. treasuries were out of favor a few days back due to worries over Fed tightening, heightened global uncertainty brought this safe asset in the limelight. Dimming prospects of sooner-than-expected Fed rate hike and geopolitical concerns may lead treasury valuation to soar.

Yields on the U.S. benchmark 10-year notes slipped to 2.33% on May 12 from 2.39% recorded the day before while yields on the U.S. benchmark 20-year notes dropped to 2.74% from 2.78% on May 11.

The ultra-popular long-term Treasury ETF – TLT – tracks the Barclays Capital U.S. 20+ Year Treasury Bond Index. TLT was up about 0.8% on May 12, 2017. Apart from TLT, investors can also consider 25+ Year Zero Coupon U.S. Treasury Index Fund ZROZ and Vanguard Extended Duration Treasury ETF EDV. These two ETFs were up 1.1% and 1.2% on May 12, 2017 (read: Trump's First 100 Days: 5 Must See ETF Charts).


Gold is often viewed as a safe haven asset to protect against financial risks, and may perform well on heightened market volatility. Investors should note that the U.S. dollar has come under pressure on subdued economic data. PowerShares DB US Dollar Bullish ETF UUP was down about 0.5% on May 12, 2017. This should give further advantage to gold investing as the metal’s pricing is normally inversely related to the greenback (read: Follow Gundlach's Insight with These ETFs). 

GLD added about 0.3% on May 12, 2017. Apart from GLD, investors can also consider COMEX Gold Trust IAU, another popular choice in this space that returned about 0.4% on May 12, 2017 (read: Will We Finally See a Bitcoin ETF?).

CurrencyShares Japanese Yen ETF FXY

The Japanese currency, yen, is often considered a classic safe haven asset that gained some strength lately.  Also, subtle lower expectations of a near-term Fed rate hike dampened the dollar to some extent and boosted yen. Investors can target this currency via FXY, which measures the value of the yen against the price of the greenback. In fact, the fund advanced about 0.5% on May 12, 2017 (see: all the Currency ETFs here).

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ISHARS-20+YTB (TLT): ETF Research Reports
CRYSHS-JAP YEN (FXY): ETF Research Reports
SPDR-GOLD TRUST (GLD): ETF Research Reports
ISHARS-GOLD TR (IAU): ETF Research Reports
VANGD-EX DUR TR (EDV): ETF Research Reports
PIMCO-25Y ZERO (ZROZ): ETF Research Reports
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