Safe-haven funds have been gaining investor attention, owing to a multitude of events. Geopolitical risks have driven these funds throughout 2017. However, worries relating to North Korea seem to be decreasing, as that country’s officials have reportedly stated their leader Kim Jong-Un’s willingness to scrap its nuclear program, in exchange for security guarantees from the United States.
Imminent Trade War?
Trump’s plans of implementing 25% tariff on steel imports and 10% tariff on aluminum imports weighed on the markets and made investors re-evaluate their investment decisions. “When a country is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump tweeted.
China has already started evaluating retaliatory measures by looking at trade of soybeans and other farm products with the United States, which might weigh on American famers and ultimately on Trump’s support among rural Americans and Republican strongholds. Moreover, China is not the only country ready with probable attacks in case Trump’s tariffs come into effect. The European Union (EU) has also hinted at retaliatory tariffs on U.S. imports if Trump administration goes ahead with its plans (read: Is Europe Swinging toward the Right? ETFs in Focus
The EU aims to apply a 25% retaliatory tax on 2.8 billion euros ($3.5 billion) worth of American goods. To this, Trump responded
, “They can do whatever they’d like, but if they do that, then we put a big tax of 25 percent on their cars - and believe me they won’t be doing it very long.”
Japanese yen and Swiss franc funds gain a lot of traction in periods of rising geopolitical risks.
This ETF seeks to provide exposure to the Japanese yen.
The fund has AUM of $154.5 million and charges a fee of 40 basis points a year. It has returned 6.7% in a year. As such, FXY carries a Zacks ETF Rank #3 (Hold), with a Medium risk outlook.
This ETF seeks to provide exposure to the Swiss franc.
It has AUM of $155.6 million and charges a fee of 40 basis points a year. It has returned 6.3% in a year. As such, FXF carries a Zacks ETF Rank #3, with a High risk outlook.
Gold funds are also considered the go-to investment vehicles at times of immense market uncertainty, given their low correlation to the overall equity markets.
This fund offers physical exposure to gold. It seeks to track the performance of the gold bullion and might turn out to be a cost-efficient way of gaining exposure to the commodity even after accounting for the fund’s expenses.
It has AUM of $35.4 billion and charges a fee of 40 basis points a year. It has returned 8.4% in a year. As such, GLD carries a Zacks ETF Rank #3, with a Medium risk outlook.
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