ETF Winners As US-China Deal Eases Trade Tensions

Offering a sigh of relief to worried investors who were apprehensive about Trump regime’s imposition of the scheduled December 15 tariffs, the world’s two largest economies, United States and China, announced negotiating a phase-one trade deal.

U.S. Trade Representative Robert Lighthizer provided some details of the deal, which are yet to be signed by the senior officials from both countries. Within the trade pact, the United States agreed to lower its 15% tariff to 7.5% on about $120 billion worth of Chinese goods.

The country also suspended indefinitely tariffs on roughly $160 billion of Chinese consumer goods,scheduled to be imposed on Dec 15.

Once the trade deal is signed, Chinese goods worth $250 billion will be subject to 25% tax and another $120 billion to a 7.5% tariff.

Meanwhile, China is committed to expand its total U.S. goods and services purchases by at least $200 billion over the next couple of years. This includes Beijing’s agreement to raise its U.S. agricultural product purchases to $40-$50 billion in each of the next two years (read: ETFs in Focus as Trade Tussle Dampens Chinese Exports).

China also strongly agreed to the partial trade accord to enhance the protection of U.S. intellectual property, regulate the forced transfer of American technology to Chinese firms, make its financial services market accessible to U.S. firms and refrain from currency manipulation.

ETF Winners to Watch

US Agricultural/Livestock ETFs

The U.S. agricultural sector has seen the worst due to the Sino-US trade war. However, the latest developments might bring some breather to the sector. Thus, investors can keep an eye on ETFs like Invesco DB Agriculture Fund (MI:DBA) , Teucrium Wheat Fund WEAT, ELEMENTS Linked to theRogers International Commodity Index — Agriculture Total Return RJA, iPath Series B Bloomberg Grains Subindex Total Return ETN JJG and iPath Series B Bloomberg Livestock Subindex Total Return ETN COW (see: all the Agricultural ETFs here).

Semiconductor ETFs

Let’s take a look at some semiconductor ETFs that can gain traction from the trade tensions receding. iShares PHLX Semiconductor ETF SOXX and VanEck Vectors Semiconductor ETF SMH can be given a thought. Investors can also consider leveraged ETFs like Direxion Daily Semiconductors Bull 3x Shares SOXL and ProShares Ultra Semiconductors USD.

Momentum ETFs in Focus

While the broader stock market is expected to benefit from positive developments in trade talks, momentum investing will likely take charge as investors seek greater returns in the short term. Momentum investing looks to fetch profits from hot picks that have shown an uptrend over the past few weeks or months.

We present five ETFs that are poised to outperform on positive trade talk news like iShares Edge MSCI USA Momentum Factor ETF MTUM, Invesco DWA Momentum ETF PDP, Invesco S&P MidCap Momentum ETF XMMO, VictoryShares USAA MSCI USA Value Momentum ETF ULVM and SPDR Russell 1000 Momentum (NYSE:ONEO) Focus ETF ONEO.

Growth ETFs

Growth stocks are high in quality and are likely to witness revenue and earnings growth at a faster rate than the industry average. Growth funds tend to put up an impressive show during an uptrend.

While there are plenty of options in the growth ETF universe, we highlighted five funds offering broad-based exposure to the U.S. stock market like Vanguard Growth ETF (BE:VUG) , Schwab U.S. Large-Cap Growth ETF (KL:SCHG) , iShares Core S&P U.S. Growth ETF IUSG, SPDR S&P 500 Growth (NYSE:SPYG) ETF SPYG and Vanguard Mega Cap Growth ETF MGK .

China ETFs

The deal presumably marks the beginning of cordial ties between China and the United States. In such a scenario, investors can keep a tab on a few China ETFs like iShares China Large-Cap ETF (TE:FXI) , iShares MSCI China ETF MCHI, Xtrackers Harvest CSI 300 China A-Shares ETF ASHR and Invesco Golden Dragon China ETF PGJ.

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