Unlocking Global Tariff Opportunities: 4 ETFs to Navigate the Turbulence with Confidence
- Omega
- Apr 7
- 6 min read
Last week we saw US President Donald Trump announce sweeping tariffs for imports into the USA. The announcement resulted in the fall of various indices and asset prices. Market participants are concerned about how other countries will respond and if a global trade war will soon be a reality. The potential rise of global tariffs has created notable waves in financial markets, prompting investors to rethink their strategies. While these market changes can cause concern, they also open doors for those who maintain a long-term view. In today's blog post I am going to share with you some ETFs that may provide strength and growth potential amid tariff-related fluctuations. Let us dive in..
1. 10X Total World Stock Market ETF: Embracing Global Diversification and Long-Term Rebound Potential
My Rationale:
The strength of the 10X Total World Stock Market ETF comes from its extensive diversification across both developed and emerging markets. This mix helps to reduce the risks tied to focusing on one region. With exposure to thousands of companies worldwide, this ETF can form a solid foundation for any portfolio aiming to navigate tariff turbulence effectively.
For example, companies like Procter & Gamble and Nestlé represent robust global players within the ETF. They have the capacity to adjust their supply chains, negotiate with alternative suppliers, and gently pass on costs to consumers. In the long term, as economies recover and stabilize, growth and innovation are likely to drive market rebounds.
Furthermore, currency fluctuations are significant in ETFs like this. For instance, a 5% drop in the US dollar can improve the returns on overseas investments, showcasing the importance of not just industry diversification, but also geographical and currency diversification.
Why buy this ETF?
Simple, because the ETF tracks the total global stock market, it will be negatively impacted by pessimistic sentiment in the medium term. This will lead to a significant price drop, thus opening an opportunity to buy this ETF at a lower price which will be beneficial when markets rebound. The world has a history of over reacting to negative scenarios however, in the long-term markets rebound as companies adapt and innovate. Since this ETF tracks the total stock market, it's price should rise as markets climb back up.
Deeper Considerations:
When engaging with the 10X Total World Stock Market ETF, keep an eye on its expense ratio and tracking error—they are essential for aligning with your financial objectives. If the expense ratio is lower, more of your money stays invested, enhancing potential returns.
Pay close attention to global economic trends and geopolitical shifts, as these can dramatically influence market sentiment. For instance, a 1% increase in global GDP can lead to a corresponding uptick in corporate earnings which will be good for this ETF.
Lastly, employing a dollar-cost averaging strategy, where you invest a fixed amount regularly regardless of market fluctuations, can smooth out the risk. This means buying more shares when prices dip and fewer when they rise, allowing for a balanced approach over time.
2. 1nvest Gold ETF: Hedging Against Uncertainty and Inflationary Pressures
My Rationale:
In turbulent economic times, gold's reputation as a safe-haven asset stands strong. The 1nvest Gold ETF offers direct exposure to gold, necessary for investors looking to shield their portfolios from market volatility.
When tariffs increase the costs of imported goods, inflation can rise, enhancing gold's allure. Data from the World Gold Council showed that during the last significant tariff dispute in 2018, gold prices surged by 19%, as investors sought refuge.
Moreover, the actions taken by central banks in response to tariffs can impact gold prices. For instance, if a central bank lowers interest rates to stimulate growth, it often results in a stronger demand for gold as an alternative investment.
Why buy this ETF?
The ETF tracks the price of gold and as more events occur that are linked to tariffs and countries respond, then Gold investors may attempt to push gold to a new all time high price. This offers the opportunity to use gold as a safe haven for our portfolios but also have medium term benefits from the price up tick.
Deep Considerations:
Timing and forecasting are crucial when investing in the 1nvest Gold ETF. Although gold tends to perform well during crises, it may see short-term price swings. Balancing your portfolio with assets likely to have higher growth potential while retaining gold for downside protection can enhance overall stability.
Keep track of gold demand from major markets like China and India; significant shifts in these countries can redirect global gold prices. Notably, in 2022, demand from these regions accounted for over 35% of global gold consumption.
Finally, examine the ETF’s fees closely. With high expenses, even a small dip in returns can significantly impact your overall investment performance.
Be informed about the factors affecting commodity prices. Supply-demand shifts, currency changes, and geopolitical events can all lead to significant market movements. Understanding the influence of major commodity-producing countries, such as Saudi Arabia's role in oil prices, can also guide your investment strategy.
Another factor to assess is the fund's expense ratio, which should remain competitive with similar funds. High fees can cut into your overall returns, particularly in volatile markets.
3. iShares Global Infrastructure ETF: Capitalizing on Infrastructure Spending
My Rationale:
Governments often increase spending on infrastructure to buffer economies from tariff impacts. The iShares Global Infrastructure ETF emphasizes companies involved in utilities, transportation, and communication services. As many governments ramp up infrastructure spending to enhance domestic industries, this ETF presents a timely investment opportunity.
Infrastructure projects usually have long-term lifecycles and less exposure to short-term market changes. For instance, even during economic downturns, infrastructure spending tends to continue, providing stability for investors.
The recent push for increased local infrastructure spending as a response to tariffs can benefit firms within this ETF. Companies in construction and utilities are likely to gain from government contracts aimed at boosting domestic production capabilities.
Why buy this ETF?
As countries attempt to defend and prop up their own economies, infrastructure development will be important and the development of infrastructure to support new supply chains will likely occur. This may not be the case here locally (in South Africa) however, countries that have the funds globally will probably spend on infrastructure and this ETF has a global perspective.
Deeper Considerations:
Before investing in the iShares Global Infrastructure ETF, assess the geographical focus of the firms within. Companies operating mainly in stable economies can offer additional protection against risks linked to emerging markets.
Also, focusing on the fund's expense structure is essential. Lower fees can significantly enhance net returns over time.
Last but not least, stay updated on regulatory changes that may impact infrastructure investments, like adjustments in public spending policies or evolving environmental regulations.
Some extra options:
The Global REIT ETF presents an opportunity to leverage the resilience and income potential of real estate during periods of global trade uncertainty. REITs, with their focus on domestic real estate assets, are generally less impacted by international tariff disputes. Furthermore, potential interest rate reductions resulting from tariff-induced economic slowdowns can lower borrowing costs for REITs, boosting profitability. The stable dividend income provided by these investments also offers an attractive option during volatile market conditions. However, investors should conduct thorough due diligence, evaluating the quality and geographic diversification of the REIT's properties, assessing its debt levels and cash flow consistency, and remaining mindful of the sector's sensitivity to interest rate fluctuations and local real estate market conditions.
Healthcare ETFs offer a compelling investment opportunity, particularly in uncertain economic climates, due to the sector's defensive nature and long-term growth potential. As essential services, healthcare demand remains stable, especially with an aging population, and companies within this sector typically exhibit robust earnings and cash flow. Furthermore, ongoing technological advancements and innovation provide avenues for sustained growth. However, investors should carefully differentiate between ETFs focusing on pharmaceuticals, biotechnology, or medical devices, and remain vigilant regarding regulatory changes and healthcare policy developments, as well as the potential impact of clinical trial results and product approvals on individual stocks.
The Invesco DB Commodity Index Tracking Fund offers a diversified way to invest in commodities (agriculture, energy, metals). Commodities can act as inflation hedges and see price spikes during tariff-related market turbulence (e.g., steel price increases). They also benefit from economic recovery and increased demand, such as during infrastructure spending booms. This ETF allows investors to capture these fluctuations while diversifying commodity risk.
Final Thoughts
Navigating a volatile market influenced by global tariffs can be challenging, but unique opportunities exist for informed investors. Understanding the nuances of ETFs like the 10X Total World Stock Market ETF, 1nvest Gold ETF, Invesco DB Commodity Index Tracking Fund, and iShares Global Infrastructure ETF can position your portfolio for growth even in uncertain times.
By maintaining a long-term perspective and considering factors shaping market trends, you can maneuver through tariff turbulence strategically. Prioritizing diversification, tracking economic indicators, and incorporating inflation-hedging asset classes are essential for a robust investment strategy.
As global conditions progress, those who adapt and position themselves wisely will likely benefit from the eventual market recovery and growth. Staying informed, being patient, and seizing strategic opportunities today will lead to a brighter financial future.
Happy Investing
-Omega
Remember: Opinions expressed in this article do not and never will constitute financial advice. Every person's financial situation is different, I recommend you speak to a financial adviser about yours
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