The ETF scene has boomed in recent years, with intriguing new “flavors” of ETFs drawing in the investment dollars of passive investors looking for a more personalized touch. After Thursday’s surge in Trump tariff turbulence, some of the more defensive, lower-volatility ETFs may act as a better way to ride out what could be a multi-month or even multi-quarter descent.
Undoubtedly, selling stocks in anticipation of a worsening crash could be a recipe for disaster should negotiations go somewhere sooner than anticipated. Unlike tariffs imposed under Trump 1.0, the latest slate of “reciprocal” (Jim Cramer views them more as “punitive”) seems aggressive and perhaps excessive enough to incentivize starting talks sooner rather than later to get a deal done before tariffs have a chance to plunge national economies into the depths.
Key Points
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Capital Group has new ETFs that could help investors ride out Trump tariff turbulence through the year.
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I’m a big fan of the methodology and relative performance of the CGCV and the CGIC.
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Stay the course. Maybe play some defense with low-choppy ETFs.
Indeed, it’s not too late to save the world economy from a dire fate. With that in mind, it makes sense to stick with the long-term game plan, rather than giving in to panic-selling. For those struggling with the surge in volatility after the S&P 500 and Nasdaq 100 tanked 4.9% and 5.4%, respectively, during Thursday’s terrifying trading session, perhaps it’s time to rotate into very high-quality dividend payers that may offer less pain on the way down.
While it’s good to be hopeful that Trump can ink several deals with major nations next week or month, it’s important also to be prepared for a scenario that sees things drag out for many months before both sides are under enough pain that a new trade deal can be inked.
Here are two defensive ETFs that have been far less painful to hold than the S&P 500 and Nasdaq 100 amid this correction. My guess is they’ll continue to attract investor intrigue as they continue holding their own amid tariff terrors. So, whether you think we’re halfway to the bottom or you want greater peace of mind with a portfolio stabilizer, the following new ETFs seem intriguing:
Capital Group Conservative Equity ETF (CGCV)
The Capital Group Conservative Equity ETF (NYSEARCA:CGCV) is a relatively new ETF that went live last summer. The ETF aims to invest in “well-established” companies with strong financials, a lengthy history of dividend payments, and a degree of economic resilience.
Indeed, the CGCV is not like your average run-of-the-mill “conservative” ETF. While it aims to provide a smoother ride, it doesn’t skimp on growth, with impressive names like Microsoft (NASDAQ:MSFT) and AbbVie (NASDAQ:ABBV) weighted at 5.8% and 3.7%, respectively. While the conservative growth (or large value) ETF isn’t immune to further pain should we enter a bear market by the summer, I like the risk/reward versus the S&P 500.
At the time of this writing, shares of CGCV are down just north of 6%, far less than the more than 12% plunge in the S&P 500. With a good amount of exposure to health care names and low-cost tech plays, and a modest 0.33% expense ratio, I find the CGCV to be an affordable way to play defense without throwing in the towel on growth.
Capital Group International Core ETF (CGIC)
Speaking of relative outperformance, we have the Capital Group International Core ETF (NYSEARCA:CGIC), which also landed on the market last summer. The ETF’s goal is international growth with a focus on dividends and lessened volatility.
Impressively, shares are down just over 3% from their recent highs, while the S&P 500 tumbled into a correction. That’s impressive resilience that deserves the full attention of retail investors. Though pricer than the CGCV, with a 0.54% expense ratio (investors should expect to pay a bit more for international stock exposure), I still find the ETF to be a great addition to any U.S.-heavy portfolio that’s light on global diversification right now.
Indeed, Trump tariffs could work their way through the global markets, but most of the damage has been concentrated in the U.S. market. Either way, I’m a big fan of the CGIC’s sector breakdown, with 22.6% in financials, 16.3% in industrials, and 11.6% in information technology, and how the ETF has held up in the face of the latest correction.