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U.S.-China Trade Talks Begin: 5 Safe ETFs to Follow

Sanghamitra Saha

There is only a month left before the U.S. PresidentTrump will raise the existing 10% tariff on $200 billion of imported Chinese goods to 25%. Currently, both the countries are in the midst of a 90-day trade truce decided in the G-20 meet last December. In the meet, China’s president Xi Jinping and U.S. President Donald Trump agreed to not announce any new tariff until Mar 1.

Against this backdrop, the countries are starting trade talks on Jan 30. However, the talks are not starting on a good note against the Justice Department’s allegations that Chinese telecom giant Huawei Technologies had stolen intellectual property from the United States — one of the key and age-old U.S. complaints about China’s trade and industrial practices, per the Washington Post.

So, much of a solution is not in sight right now. Per Washington Post, a long-term agreement that would fulfil Presidents Trump and Xi Jinping’s terms may not take place this week even if the two conform to a brief treaty (read: U.S.-China to Reach a Trade Deal? ETF Areas to Gain).

Now tariffs will jump to 25% post Mar 1, if the duo fails to reach a definite trade deal. And if such a situation arises, HSBC estimates 4.5 percentage points would be off from 2019 earnings growth (read: China's 2018 GDP Growth 28-Year Low: ETFs That Lost the Most).

So, it’s better to have a safe portfolio right now, given less chances of a far-reaching trade deal. Below we highlight a few ETFs that should stand to gain even if the meeting is not successful.

Schwab U.S. Dividend Equity ETF (SCHD)

For safety, considering dividend-focused quality ETFs makes sense. The fund SCHD measures the performance of high dividend-yielding U.S. stocks that have a record of consistently paying dividends. The fund yields 2.95% annually (read: 5 Dividend Growth ETFs to Fight Trade & Inflation Fears).

Healthcare ETF Vanguard (VHT)

This sector is less ruffled by economic fluctuations due to its non-cyclical nature. The sector provides a defensive tilt to the fund’s portfolio in a volatile market caused by trade war fears. Also, decent earnings, rising M&A activities, a positive regulatory backdrop and some novel drug approvals should help the fund (read: Best-Performing ETFs of January).

Invesco S&P 500 Low Volatility ETF (SPLV)

Global growth worries, uncertainty about trade deal and fading impact of fiscal stimulus like tax reform may keep the S&P 500 subdued in the near term. So, one can have an exposure to low-volatility S&P 500 ETFs like SPLV. The underlying index consists of the 100 stocks from the S&P 500 Index with the lowest realized volatility over the past 12 months (read: Winning ETF Strategies for 2019).

Global X SuperDividend Alternatives ETF (ALTY)

The underlying Indxx SuperDividend Alternatives Index of the fund tracks the performance of the highest dividend yielding securities in each category of alternative investments, as defined by the Index Sponsor.

The fund has focus on REITs (24.66%), BDCs and Private Equity (24.28%) and Covered Call Strategies (12.57%), thus offering a spread-out exposure. The product yields a solid 7.20% annually. So, investors should benefit from this benchmark-beating yield (read: Guide to 10 ETFs Yielding 6% or More).

iShares Residential Real Estate ETF REZ

The underlying FTSE NAREIT All Residential Capped Index measures the performance of the residential, healthcare and self-storage real estate sectors of the U.S. equity market. With the Fed adopting a dovish stance to further rate hikes, U.S. treasury yields have been hovering at lower levels. This should help this residential real estate ETF, given the fact that the U.S. economy has been on a solid note and demand for real estate should be steady.

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Vanguard Health Care ETF (VHT): ETF Research Reports
Invesco S&P 500 Low Volatility ETF (SPLV): ETF Research Reports
Schwab U.S. Dividend Equity ETF (SCHD): ETF Research Reports
iShares Residential Real Estate ETF (REZ): ETF Research Reports
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