Top and Flop ETFs as Trump Calls Off North Korea Summit
After heightened political rhetoric, U.S. president Trump pulled out of the scheduled June meeting with North Korea’s Kim Jong Un. Strained relations between the United States and North Korea have been dominating the headlines for long. Late Tuesday, Trump commented that a planned historic meeting between the United States and North Korea may not take place if Pyongyang fails to comply with certain conditions (read: Quality ETFs in Focus on Dovish Fed).
On May 24, the White House called off the June 12 meeting due to the North Korea’s “tremendous anger and open hostility” targeted toward Washington. However, North Korea says it's still keen on resolving issues with the United States.
Against this backdrop, we would like to highlight a few ETFs that could gain or lose in the near term.
Gainers
Defense
Investors should note that with geopolitical uncertainty on the rise, developed as well as emerging nations have been bumping up their defense spending. So, any negative developments in the U.S.-North Korea relationship will veer investors to defense stocks and related funds.
Though in response to the cancellation of the meeting, Kim Jong Un adopted a peacemaking tone, sensing possibilities of a warfare, defense stocks went northward. This puts SPDR S&P Aerospace & Defense ETF XAR in focus. The fund added 0.7% on May 24.
Gold
Gold is often viewed as a safe-haven asset to provide hedge against financial risks and may perform well on heightened market volatility. SPDR Gold Shares GLD gained about 0.9% on the cancellation of the meeting.
Yen
The Japanese currency, yen, is often considered a classic safe-haven asset. Also, slightly lower expectations of a faster Fed rate hike this year dampened the dollar to some extent and boosted the yen.
Investors can target this currency via FXY, which measures the value of yen against the greenback. On May 24, PowerShares DB US Dollar Bullish ETF UUP was off 0.1% while PowerShares CurrencyShares Japanese Yen ETF FXY advanced 0.8% (see: all the Currency ETFs here).
Treasury Bonds
Though U.S. treasuries were out of favor a few days back due to worries over faster Fed tightening, North Korea tensions brought this safe asset in the limelight. Dimming prospects of faster-than-expected Fed rate hike and geopolitical concerns may lead treasury valuation to soar (read: Quality ETFs in Focus on Dovish Fed).
Yields on the U.S. benchmark 10-year notes slipped to 2.98% on May 24 from the month-high of 3.11%. iShares 20+ Year Treasury Bond ETF TLT added about 0.8% on May 24.
Losers
Asia
Asian stocks especially were subdued on May 24 on the news. iShares MSCI All Country Asia ex Japan ETF AAXJ lost 0.3% on May 24, Vanguard FTSE Pacific ETF VPL was off about 0.5%, iShares MSCI South Korea Capped ETF EWY lost about 1.3%, iShares MSCI Japan ETF EWJ retreated about 0.6% and iShares Edge MSCI Min Vol Asia ex-Japan ETF AXJV shaded 1.1%.
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ISHARS-20+YTB (TLT): ETF Research Reports
CRYSHS-JAP YEN (FXY): ETF Research Reports
GOLD (LONDON P (GLD): ETF Research Reports
ISHARS-JAPAN (EWJ): ETF Research Reports
PWRSH-DB US$ BU (UUP): ETF Research Reports
ISHARS-MS AS-JP (AAXJ): ETF Research Reports
VANGD-FTSE PAC (VPL): ETF Research Reports
SPDR-SP AER&DEF (XAR): ETF Research Reports
ISHARS-S KOREA (EWY): ETF Research Reports
ISHARS-MS EJ MV (AXJV): ETF Research Reports
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