Wall Street is off to a shaky start in Q2 and has been delivering weak performances. The S&P 500 and the Nasdaq are off 2% each in the past five days. A rally in oil prices and lower chances of sooner-than-expected Fed rate cuts kept the broader market edgy currently (read: 4 Reasons Why Oil & Energy ETFs Can Continue to Soar)..

A rally in oil amid geopolitical tensions, a resilient U.S. economy and sluggish decline in U.S. price inflation spread jitters among investors. In any case, the past few days have been choppy for the U.S. market.

Investors have been dumping high growth and high beta stocks thanks to valuation concerns, profit-taking activity and some sluggish global economic indicators like sluggish Euro zone economic data. Euro zone economic growth was flat in Q4 of 2023 against the previous quarter.

A key Federal Reserve official signaled on Apr 4, 2024, that the central bank might not need to cut interest rates this year if inflation fails to make further progress toward the 2% target, per a Bloomberg article. In a virtual event hosted by LinkedIn, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, adopted a careful stance regarding the likelihood of interest rate reductions in the upcoming months.

Meanwhile, Brent crude topped $90 a barrel as Israeli Prime Minister Benjamin Netanyahu said at a security cabinet meeting his country will operate against Iran and its proxies and will hurt those who seek to harm it. President Joe Biden told Netanyahu in a call that U.S. support for his war would be contingent on taking new steps to protect civilians., per Bloomberg.

Market Impact

Investors appeared to take these data and facts at face value and rushed toward fear-induced selling. The sudden rise of chaos in the market brightened the appeal for safe haven assets. Volatility ETFs which track the implied volatility of the market also surged thanks to the massacre in the stock market. iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX Quick QuoteVXX - Free Report) has added about 7.7% in the past five days (as of Apr 4, 2024).

Below, we highlight a few of the biggest gainers from the latest sell-off in the stock market. Also, these ETFs may continue to shine should tensions persist in the global economy in the near term.

Gold

Gold is often viewed as a hedge against market risk. The metal has seen some strength lately thanks to this market turmoil. Gold bullion ETF SPDR Gold Trust (GLD Quick QuoteGLD - Free Report) has jumped 3.4% in the past five days.

Yen

The Japanese currency yen is another asset class which is considered as a safe haven. Despite the bank of Japan’s relentless effort to keep the currency weaker, yen has gained strength lately. The ETF tracking the yen – CurrencyShares Japanese Yen ETF (FXY Quick QuoteFXY - Free Report) – added about 0.1% during the last five days, although the fund is down 6.2% this year. BoJ has also ended the negative rate era recently. This is another reason for the yen’s latest strength.

Long-Term U.S. Treasury

U.S. 10-year benchmark treasury yield slumped to 4.31% on Apr 4, 2024, down from 4.36% recorded on Apr 2 and Apr 3, 2024. Notably, U.S. Treasuries are also perceived as risk-free asset class which is why iShares Barclays 20 Year Treasury Bond Fund (TLT Quick QuoteTLT - Free Report) and iShares Barclays 7-10 Year Treasury Bond Fund (IEF Quick QuoteIEF - Free Report) added about 0.7% and 0.3% on Apr 4, 2024.

Bottom Line

Although we do not expect this bearish trend to continue especially in the United States, which has a strong trend underneath, the upheaval in the stock market may persist for a week or so courtesy of the gloomy global backdrop and an oil price rally. However, as the earnings season unfolds, this fluffy market will take a solid shape and decide on the fate of several asset classes and sectors.