The age-old stock market proverb “Sell in May” proved correct this year as trade tensions between China and the United States escalated. The S&P 500 (down 4.8%), the Dow Jones (down 4.5%) and the Nasdaq (down 6.8%) were in red in the past month (as of May 28, 2019).
It all started with the Trump administration raising tariffs on $200-billion worth of Chinese goods from 10% to 25% on May 10 and China announcing a retaliatory move —- a tariff hike on $60-billion worth of American goods to 25% starting
Jun 1. President Donald Trump is considering additional tariffs on an incremental $325 billion of Chinese imports (read: Full-Blown Trade Spat: 5 Most-Vulnerable Sector ETFs & Stocks).
Not only this, Washington has U.S. firms from doing business with the Chinese giant Huawei, citing national security concerns. On May 23, the U.S. Commerce Department stated that
it was proposing a new rule to implement anti-subsidy duties on products from countries that undervalue their currencies against the U.S. dollar, another move that could undermine the Chinese trade (read: Tense About Trade War? Follow Goldman With 5 ETF Strategies). VIDEO Technology Stocks: A Key Risky Realm
Tech companies, specifically semiconductors and tech hardware and equipment, are most exposed to this trade war. This is because the rising tariffs will make the products of tech giants like Apple and other American biggies costlier to manufacture. This, in turn, will likely compel hardware manufacturers to hike prices at home while
duties on the finished goods exporting to China could also make the products expensive for buyers in that country, per techcrunch.com.
Going by the Morgan Stanley equity strategists, “semiconductor and semiconductor equipment companies have the highest revenue exposure to China at
52%” and are thus prone to maximum hazards on the heightening trade stress. Tech Hardware & Equipment companies have about 14% exposure to China.
Needless to say that against this backdrop, tech and semiconductor ETFs would be in the red. This is why tech-heavy Nasdaq slid the most among the big-three U.S. indices.
Technology Select Sector SPDR Fund ( XLK - Free Report) has lost 7% in the past month. Nonetheless, some tech ETFs did not shed value as massively as the broader sector and some in fact, have gained in the month.
Below, we highlight a few minimum-hurt tech ETFs amid a full-blown trade brawl (read:
5 Tech ETFs Up About 20% This Year, Still Have Room to Run). Global X FinTech Thematic ETF ( FINX - Free Report) ) — Up 1% ETFMG Prime Mobile Payments ETF ( IPAY - Free Report) ) — Up 0.8% Tortoise Digital Payments Infrastructure Fund ( TPAY - Free Report) ) — Up 0.4% Global X Cloud Computing ETF ( CLOU - Free Report) ) — Down 1.2% BlueStar Israel Technology ETF ( ITEQ - Free Report) ) — Down 1.4% Want key ETF info delivered straight to your inbox?
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