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If Trump Flares Up Uncertainty, Profit from These ETFs

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Though the U.S. stock market had a stellar run after the election of Trump in November, the trend seems to have reversed in recent weeks. A host of challenges laid by Trump seems to be blocking the bullish trend in the stocks, leading to increased market uncertainty and political worries.

Inside the Rising Woes

Trump’s protectionist and anti-trade policies like immigration curb, travel ban, border tax, and termination of trade agreements have sparked concerns over global trade, economic growth and political stability.

Soon after he took office on January 20, Trump terminated the 12-nation Trans-Pacific Partnership deal, which covers 40% of the world's economy. This could hit American workers and manufacturing activities. In addition, it is seeking to renegotiate the North American Free Trade Agreement (NAFTA) that would heighten geopolitical risk in the Middle East and Asia.

Trump also stated his plan to build a wall along the U.S. southern border to keep Mexican immigrants away and wants Mexico to pay for it. Plus, the President is considering a 20% border tax on imports from Mexico that could help in building a U.S.-Mexico wall. This could deepen the crisis between the two neighbors and result in a trade war (read: Welcome Trump Era with These ETFs).

Further, Trump signed an executive order to suspend entry into the U.S. and blocked visas of citizens from seven Muslim-dominated nations – Iraq, Syria, Iran, Sudan, Libya, Somalia and Yemen – for 90 days. The move triggered widespread protests and resulted in chaos across the globe.

As the President is focusing too much on anti-trade policies, fears over the delayed implementation of tax cuts, deregulation and fiscal stimulus that propelled the rally since election are weighing on the stock market.

Added to the uncertainty is the series of elections and referendum in Europe this year that could create chaos all over the world market.  

All these events have led to risk-off trading, with lower-risk securities including precious metals and bonds in vogue. Given this, we have highlighted some ETFs that could definitely reward investors in the current market environment.

iPath S&P 500 VIX Short-Term Futures ETN (VXX - Free Report)

While volatility products have been terrible performers over the medium and long terms due to a contangoed market and a steep roll cost, they are intriguing picks during periods of turmoil or uncertainty. 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 has amassed $999.1 million in AUM and charges 89 bps in fees per year. It sees truly impressive volume of about 37.5 million shares a day and shed 8.2% over the past 10 days (read: Profit from the Trump Bump with Volatility ETFs).


Gold is often viewed as a store of value and a hedge against market turmoil. The product tracking this bullion like GLD could be an interesting pick to play the 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 is the ultra-popular gold ETF with AUM of $30.4 billion and heavy volume of nearly 9.3 million shares a day. The ETF charges 40 bps in fees per year from investors and added 1.6% over the past 10 days (read: Can Gold ETFs Regain Shine in 2017?).

iShares 20+ Year Treasury Bond ETF TLT

The products tracking the long end of the yield curve often act as safe haven. TLT provides exposure to long-term Treasury bonds by tracking the ICE U.S. Treasury 20+ Year Bond Index. It is one of the most popular and liquid ETFs in the bond space with AUM of $5.2 billion and average daily volume of around 9.5 million shares. Expense ratio came in at 0.15%. Holding 34 securities in its basket, the fund focuses on the top credit rating bonds with average maturity of 26.35 years and effective duration of 17.25 years. It was down 1% over the past 10 days (see: all Government Bond ETFs here).

Guggenheim CurrencyShares Japanese Yen Trust FXY

Yen is considered a safe haven currency in times of uncertainty. Investors could tap this via FXY which appears a great way to play a future rise in the yen relative to the U.S. dollar. It tracks the movement of the yen relative to the U.S. dollar, net of the Trust expenses, which are expected to be paid from the interest earned on the deposited Japanese yen. The fund charges 40 bps a year in fees and sees a good volume of roughly 196,000 shares per day. The product has accumulated $136.4 million in its asset base and added 1.2% in the same period.

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