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4 Safe Haven ETFs to Escape Geopolitical Tensions

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Though the broad U.S. stock market is riding high this year, the latest series of events seem to be stalling the ascent. The major culprit is heightening geopolitical tension following the U.S. air strike on Syria last week that has created chaos across the world.

In particular, it dealt a major blow to relations between Moscow and Washington and fueled tensions in North Korea. The situation seems to be worsening with the U.S. considering further military action on Syria and warnings from North Korea of a nuclear war if American Navy ships keep heading toward the Korean Peninsula. Additionally, Trump tweeted yesterday: "North Korea is looking for trouble. If China decides to help, that would be great. If not, we will solve the problem without them! U.S.A." (read: South Korea ETFs in Focus on Rising Military Tensions).

It shook the complacency in the stock market, compelling investors to dump the riskier assets and take flight to safety at least for the near term. Added to the geopolitics is the French presidential election, wherein both the right-wing candidate Marine Le Pen and left-wing candidate Jean Luc Melenchon want to put the country’s European Union membership to a vote.

Apart from these tensions, the possibility of a government shutdown on April 29 if Congress does not pass the proposed spending bill and lofty valuations are weighing on the market.

Against such a backdrop, we have highlighted four safe haven ETFs that investors should consider in their portfolio, especially if geopolitical tensions continues to escalate. These products will likely benefit from the crisis and would be in focus in the weeks ahead (read: 4 Sector ETFs to Profit from if Geopolitics Rule).


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 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 is the ultra-popular gold ETF with AUM of $33.8 billion and heavy volume of nearly 8.1 million shares a day. It charges 40 bps in fees per year from investors. The ETF gained about 1.3% over the past five days and has a Zacks ETF Rank of 3 or ‘Hold’ rating with Medium risk outlook (read: Gold ETFs Tussle Between Geopolitics and Fed).

Guggenheim CurrencyShares Japanese Yen Trust (FXY - Free Report)

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 192,000 shares per day. The product has accumulated $108.3 million in its asset base and added 0.94% in the same period. It has a Zacks ETF Rank of 3 with a Medium risk outlook.

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

While volatility products have been terrible performers over medium and long term due to a contangoed market and a steep roll cost, VXX seem to be outperformer gaining about 13.8% in the past five sessions. The ETN focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility of 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 month VIX futures contracts. The note has amassed nearly $1.1 billion in AUM and charges 89 bps in fees per year. Volume is extremely solid as it exchanges more than 42.7 million shares per day (read: 3 Low Volatility ETFs to Buy if Global Tensions Flare Up).

iShares 20+ Year Treasury Bond ETF TLT

The products tracking the long end of the yield curve often provide a 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 $6 billion and average daily volume of more than 9.8 million shares. Expense ratio comes in at 0.15%. Holding 32 securities in its basket, the fund focuses on the top credit rating bonds with average maturity of 26.24 years and effective duration of 17.39 years. It was up 1.2% in the same timeframe. Though the short-term outlook looks promising on the ongoing turmoil, the long-term outlook is negative given the Zacks ETF Rank of 5 or ‘Strong Sell’ rating with High risk outlook. This suggests that the uncertainty in the market might not last long.

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