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Trade war tensions have been the biggest worry for the global stock market in recent times. It all started last March. On Mar 1, 2018, President Donald Trump announced his plan to impose a 25% tariff on steel and a 10% tariff on aluminum imports. Then, the move against China was at fever pitch over the course of the year as both countries imposed tit-for-tat tariffs.
So far, the United States has imposed tariffs on $250 billion worth of imports from China, while Beijing has retaliated with tariffs on $110 billion worth of U.S. goods, per the source. Though things started improving from 2019 with both countries negotiating hard, the dispute weighed materially on global markets in 2018.
Late last month, Trump even postponed the increase in tariffs on $200 billion in Chinese goods to 25% from 10% from this month, citing “substantial progress” in trade talks. There are chances that Trump and China’s president Xi Jinping could strike an official trade deal at a summit around Mar 27, the Wall Street Journal reported on Sunday (read: 10 ETF Areas to Gain as Trump Delays Additional Tariffs).
Against this backdrop, it must be interesting to point out the areas that have survived the trade storm in the last one year and posted solid gains.
Aberdeen Standard Phys PalladiumShares ETF (PALL – Free Report) – Up 55.3%
Palladium prices have been on a tear. The white metal has more than tripled since January 2016, per Bloomberg. The rally is mainly backed by growing global demand and stagnating supply. Notably, the automotive industry, mainly involved in the manufacturing of catalytic converters for vehicles, is a big driver for palladium.Since platinum-using diesel-fueled cars are actually experiencing market share loss “amid an environmental backlash,” palladium has rallied (read: A Brighter 2019? Palladium or Gold ETFs).
Invesco Dynamic Software ETF (PSJ – Free Report) – Up 28.6%
Tech stocks suffered a lot in 2018 due to overvaluation concerns, U.S.-China trade conflict, a likely stringency in social media regulations following reports of Facebook’s data breaches in March and rising rate worries in the fourth quarter.
Tech stocks, in fact, have solid revenue exposure to China. Per Morgan Stanley equity strategists, “semiconductor companies have the highest revenue exposure to China at 52%” and were thus exposed to maximum risks on rising trade tensions.
But nothing could undermine the winning momentum of the software ETF. Rising demand for emerging technologies, increasing efforts for automation and rising spending on enterprise software especially cloud (per Gartner) had already made the space a certain winner. Gartner projects a 3.2% uptick in global IT spending to $3.77 trillion in 2019 (read: Wall Street’s Best Start Since 1987: Top ETFs of Top Sectors).
iShares Residential Real Estate Caped ETF (REZ – Free Report) – Up 28.5%
Though trade tensions created quite an upheaval in the market in 2018, real estate ETFs maintained a slow-but-steady upward progression. An upbeat U.S. economy probably has helped the sector. Also, long-term yields skidded at the end of 2018 on global growth worries. So, this rate-sensitive sector benefited a great deal.
iShares US Medical Devices ETF (IHI – Free Report) – Up 28.2%
The sector is viewed as a defensive one, which helped it to shine amid market uncertainty emanating from trade war tensions between the United States and China. President Trump’s announcement of the drug plans in May was in the best interest of pharma companies.The U.S. health care supply chain is consolidating fast, with deals across the industry ranging from insurers, pharmacies to drug distributors. Tax reform was also a great tailwind. All these have made this fund a clear winner (read: Top Sector ETFs of 2018).
Invesco DWA Utilities Momentum ETF (PUI – Free Report) – Up 28%
Investors should note that this safe-haven sector has received enough boost from rising trade tensions between the United States and China in 2018. This rate-sensitive and high-yielding space also benefited from a decline in long-term treasury yield (due to global growth and geopolitical tensions) at the end of 2018 (read: 5 Top Smart-Beta ETF Charts of 2018).
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