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Russia-Ukraine Tensions Flare Up: ETF Strategies to Win
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Russia-Ukraine tensions are back this year after 2014. Russia’s Crimea annexation (previously a Ukrainian territory) had then hit headlines thanks to its military move and the resultant standoff with the West as the Crimean maneuver was viewed as an utter violation of international law by the West. In protest, the United States and the European Union (EU) imposed some bans on some Russian diplomats.
If the crisis worsens, investors may benefit out of some ETF strategies. Let’s figure out.
Brent Crude & Natural Gas Prices to Gain
United States Natural Gas Fund, LP (UNG - Free Report) has been gaining this year. It is already up 23.4% in 2022. If Russia tensions increase, gas prices in Europe — which soared to new highs last year — will go up further, per Capital Economics, quoted a CNBC article. Russia is the provider of about 35% of Europe’s gas.
Europe is highly dependent on Russia for energy, importing about 40% of its energy requirement. Thus, at the economic juncture when COVID-19 is a big crisis and inflation is soaring, the European Union is less likely to enforce a commodity export ban on Russia in 2022. Still, any supply disruption may push up Brent crude prices higher in a market already characterized by tight supplies. United States Brent Oil Fund, LP (BNO - Free Report) is an intriguing bet in this regard. BNO is up 21.1% this year.
Agro-ETFs Like Wheat & Corn Likely to Stage a Rally
Russia is a commodity-rich nation. Apart from oil and coal, wheat is abundant in Russia. Ukraine is also one of the largest exporters of wheat selling a large portion of its grains to Egypt and to other Middle Eastern countries and Africa. Corn could also rally higher if tensions flare up in Ukraine, which is a leading exporter of the grain.
So, the Russia-Ukrainian crisis would disrupt Ukraine’s export activity that could significantly push up wheat and corn prices. Teucrium Wheat ETF (WEAT - Free Report) and Teucrium Corn ETF (CORN - Free Report) should thus be closely watched.
Palladium to Record a Leg Higher
Russia is rich in palladium too. Russia's Nornickel is the world's largest palladium producer. Investors should note that Palladium jumped to a record in May 2021 before slumping and becoming the worst-performing major commodity of 2021. This has corrected the metal’s sky-high valuation. The metal, 85% of which is used in pollution-reducing catalytic converters in gasoline engines, witnessed the slump in 2021 due to the global chip shortage that curtailed consumption of it in the auto industry (per a minning.com article).
However, industry players are expecting a rally in the metal in 2022 thanks to lower valuation and gradually-easing chip crunch situation. Russia-Ukraine crisis, if it all heightens, may also disrupt the supply situation and boost the price of palladium. Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report) has gained about 23% this year.
Defensive ETFs to Gain
It is also important to hedge one’s portfolio with defensive ETFs. AGFiQ US Market Neutral AntiBeta ETF (BTAL - Free Report) takes long positions in low-beta stocks and short positions in high-beta stocks on a dollar neutral basis.
Low-volatility ETFs like Invesco S&P 500 Low Volatility ETF (SPLV - Free Report) also plays an important role in this regard. ProShares MSCI Europe Dividend Growers ETF (EUDV - Free Report) and SPDR S&P Dividend ETF (SDY) are two dividend growth ETFs targeting the European and the U.S. market. Both offer 2.63% and 2.73% annual yields, respectively, which are benchmark-beating. Such products also offer great cushion in the current volatile environment.
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Russia-Ukraine Tensions Flare Up: ETF Strategies to Win
Russia-Ukraine tensions are back this year after 2014. Russia’s Crimea annexation (previously a Ukrainian territory) had then hit headlines thanks to its military move and the resultant standoff with the West as the Crimean maneuver was viewed as an utter violation of international law by the West. In protest, the United States and the European Union (EU) imposed some bans on some Russian diplomats.
This year too, the Russia-Ukraine crisis seems to have escalated. U.S. officials said they estimated that Russia had built up around 190,000 military personnel near Ukraine, adding to the threat of a near-term invasion. And this came a day after President Joe Biden told reporters on Thursday that the possibility of a Russian invasion of Ukraine was "very high" in the coming days.
If the crisis worsens, investors may benefit out of some ETF strategies. Let’s figure out.
Brent Crude & Natural Gas Prices to Gain
United States Natural Gas Fund, LP (UNG - Free Report) has been gaining this year. It is already up 23.4% in 2022. If Russia tensions increase, gas prices in Europe — which soared to new highs last year — will go up further, per Capital Economics, quoted a CNBC article. Russia is the provider of about 35% of Europe’s gas.
Europe is highly dependent on Russia for energy, importing about 40% of its energy requirement. Thus, at the economic juncture when COVID-19 is a big crisis and inflation is soaring, the European Union is less likely to enforce a commodity export ban on Russia in 2022. Still, any supply disruption may push up Brent crude prices higher in a market already characterized by tight supplies. United States Brent Oil Fund, LP (BNO - Free Report) is an intriguing bet in this regard. BNO is up 21.1% this year.
Agro-ETFs Like Wheat & Corn Likely to Stage a Rally
Russia is a commodity-rich nation. Apart from oil and coal, wheat is abundant in Russia. Ukraine is also one of the largest exporters of wheat selling a large portion of its grains to Egypt and to other Middle Eastern countries and Africa. Corn could also rally higher if tensions flare up in Ukraine, which is a leading exporter of the grain.
So, the Russia-Ukrainian crisis would disrupt Ukraine’s export activity that could significantly push up wheat and corn prices. Teucrium Wheat ETF (WEAT - Free Report) and Teucrium Corn ETF (CORN - Free Report) should thus be closely watched.
Palladium to Record a Leg Higher
Russia is rich in palladium too. Russia's Nornickel is the world's largest palladium producer. Investors should note that Palladium jumped to a record in May 2021 before slumping and becoming the worst-performing major commodity of 2021. This has corrected the metal’s sky-high valuation. The metal, 85% of which is used in pollution-reducing catalytic converters in gasoline engines, witnessed the slump in 2021 due to the global chip shortage that curtailed consumption of it in the auto industry (per a minning.com article).
However, industry players are expecting a rally in the metal in 2022 thanks to lower valuation and gradually-easing chip crunch situation. Russia-Ukraine crisis, if it all heightens, may also disrupt the supply situation and boost the price of palladium. Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report) has gained about 23% this year.
Defensive ETFs to Gain
It is also important to hedge one’s portfolio with defensive ETFs. AGFiQ US Market Neutral AntiBeta ETF (BTAL - Free Report) takes long positions in low-beta stocks and short positions in high-beta stocks on a dollar neutral basis.
Low-volatility ETFs like Invesco S&P 500 Low Volatility ETF (SPLV - Free Report) also plays an important role in this regard. ProShares MSCI Europe Dividend Growers ETF (EUDV - Free Report) and SPDR S&P Dividend ETF (SDY) are two dividend growth ETFs targeting the European and the U.S. market. Both offer 2.63% and 2.73% annual yields, respectively, which are benchmark-beating. Such products also offer great cushion in the current volatile environment.