Markets
XME

6 ETFs to Tap as Trump's Tariff Plans Spook Markets

Multiple stacks of coins
Credit: Shutterstock photo

February was the worst month in two years for the U.S. stock market. This is especially true as worries over inflationary pressure and the resultant increase in interest rates engulfed the market, pushing the major indices into correction territory early in the month.

However, the stocks recovered more than half of the losses with the S&P 500 and Dow Jones falling 3.9% and 4.3% respectively, for the month and Nasdaq dropping 1.9%. Notably, the Dow and S&P 500 snapped their 10-month winning streak, their longest since 1959 while the Nasdaq posted a monthly loss for the first time in eight months. All of the 11 S&P 500 sectors closed out February in the red (read: 4 Market-Beating Sector ETFs & Stocks of February ).

The weakness continued with the start of March as Trump's tariff news spooked markets, flaring up inflation fears and threats of a trade war. President Trump announced his plan to impose severe tariffs of 24% on steel imports and 10% on aluminum imports "for a long period of time."

The move will be detrimental to economic growth, as tariffs would lead to higher prices for a wide range of industrial products including vehicles, pipelines, boats, airplanes, locomotives and even beer, affecting many industries in the broad market. Additionally, it could raise concerns about retaliation from China or other major U.S. trading partners, triggering a global trade war (read: Watch These ETFs as Trade War Risks Rise ).

Added to the anxieties was Trump's tweet on March 2, which says: "When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don't trade anymore-we win big. It's easy!"

Against such a backdrop, investors could stash their cash in the following ETFs that offer stability or even profit:

iShares Russell 2000 ETF IWM

Investors could seek shelter in a basket of small-cap stocks that have less international exposure and generate most of their revenues from the domestic market. These pint-sized stocks are less vulnerable to trade war or any other political issues and could better insulate investors against Trump's trade-protectionism policy. While the small-cap space is crowded with ETFs, the ultra-popular IWM having a Zacks ETF Rank # 3 (Hold) and a Medium risk outlook could be the best pick. It provides exposure to a broad basket of 1,961 stocks by tracking the Russell 2000 Index and charges 20 bps in expense ratio (read: Trump's Import Tariffs: ETF & Stocks in Focus ).

SPDR Gold Trust ETF GLD

The threat of global war has raised the appeal for the bullion as a store of value and hedge against market turmoil. The ultra-popular product tracking this bullion like GLD could be an interesting pick in the current market turbulence. The fund tracks the price of gold bullion measured in U.S. dollars, and kept in London under the custody of HSBC Bank USA. It charges 40 bps in fees per year from investors and has a Zacks ETF Rank #3 with a Medium risk outlook (read: Welcome Powell Era With These ETFs ).

iPath S&P 500 VIX Short-Term Futures ETN VXX

Volatility has been playing foul in the stock market from the past month and tariff is now the latest theme to bolster instability in global stock markets in the weeks ahead. As a result, investors should stock up volatility ETFs like VXX into their portfolio. The ETN focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility in the S&P 500 index at various points along the volatility forward curve. It provides investors with exposure to a daily rolling long position in the first and second months VIX futures contracts. The note charges 89 bps in fees per year (read: VIX in Backwardation: Volatility ETFs In Focus ).

SPDR S&P Metals & Mining ETF XME

This ETF will be the clear beneficiary of the Trump's tariff plan and the resultant increase in metal prices. It offers a broad exposure to the U.S. metal and mining industry, holding 39 stocks in its basket. Steel firms account for half of the portfolio while aluminum stocks make up for nearly 12% share. The fund has 0.35% in expense ratio (read: Steel ETF Soaring: Will the Trend Continue? ).

ProShares Ultra Short Industrials SIJ

While steel and aluminum producers will benefit, other industries will be hit hard as they may struggle with higher raw materials prices, which will force them to raise prices for consumers. As such, an inverse play on the sector might be a good idea. SIJ offers two times the inverse (-2x) of the daily performance of the Dow Jones U.S. Industrials Index, charging investors 95 bps in fees per year (read: 4 Inverse ETFs That Soared More Than 20% in February ).

ProShares Short S&P500 ETF SH

Should tariff come into effect, it could result in a global selloff with Wall Street leading the way as trading partners started threatening a retaliation. The European Union is weighing retaliatory tariffs on $3.5 billion worth of U.S. imports, according to Reuters, while other countries like Canada, Mexico, China and Brazil have also warned on countermeasures. Investors seeking an outright bet against the stock market could find SH an intriguing choice. This fund provides unleveraged inverse exposure to the daily performance of the S&P 500 index, charging 89 bps in annual fees (read: Inverse Equity ETFs to Bet on Historic Selloff ).

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 >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

GOLD (LONDON P (GLD): ETF Research Reports

ISHARS-R 2000 (IWM): ETF Research Reports

IPATH-SP5 VX ST (VXX): ETF Research Reports

SPECIALTY - HEA (SH): ETF Research Reports

SPDR-SP MET&MIN (XME): ETF Research Reports

PRO-ULS INDU (SIJ): ETF Research Reports

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

XME SH GLD IWM

Other Topics

ETFs

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More