It’s a stomach-churner of a stock market right now, with stocks surging by close to 10% and tanking by just north of 5% the next day. Indeed, if you’ve found that Trump 2.0 and the latest wave of tariffs aren’t for you, you’re not alone, especially if you’re already retired and find you’ll be against it come time to make your next big annual drawdown.
In any case, I think not overreacting either way is the best move. If you do find you’re more exposed to risk, it may be a nice opportunity to lighten up on the rips as you seek to nibble away at the defensive plays on the dips. Of course, there’s no telling when Trump’s trade war will end and how much damage each nation will take straight to the chin. Either way, I’d be willing to play the long game and stay invested, as we may very well have more days like Wednesday when the stock market unexpectedly enjoys a historic rally.
Though it’s difficult to tell where stocks will be on a day-to-day basis, I think those who choose to get out could risk missing out on an entire year’s worth of gains in a single day. In any case, those who may have bailed from stocks may have an opportunity to get back in with Thursday providing a bit of a dip in response to escalating Trump tariffs in China, which may very well amount to 145%. As to whether Trump will hit the pause button on tariffs imposed on Chinese goods remains the big question.
Either way, if either party doesn’t back down, investors should prepare for nothing less than more nauseating volatility in both directions. Could we have more 5-10% single-day pops and drops? I’d argue it’s likely, given there seem to be developments (good and bad) on the daily and overreactions in both directions.
In this piece, we’ll look at two passive ways to diversify your portfolio while removing some volatility. So, if you’re ready to fight back against volatility, perhaps the following two exchange-traded funds (ETFs) could be worth a grab on the way down.
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BMO Low Volatility Canadian Equity ETF
What’s the best way to combat higher volatility? Look no further than BMO Low Volatility Canadian Equity ETF (TSX: ZLB), one of my favourite low-volatility ways to steer through a more turbulent TSX. Shares have slipped just over 6% from recent highs, but that’s far less than the S&P 500, which could easily find itself revisiting those year-to-date depths and bear market territory (a 20% drop).
Either way, I like the holdings within the ZLB and think they have what it takes to hold up should Trump tariffs continue to weigh market sentiment down through the summer months. With a nice 2.3% yield and a 0.63 beta, the ZLB may be the way to zig as markets zag in both directions.
iShares S&P/TSX Global Gold Index ETF
iShares S&P/TSX Global Gold Index ETF (TSX: XGD) is another fantastic ETF to consider scooping up if you’re looking to hedge against macro risks and a return of inflation. Gold has shone brightly amid the Trump tariff volatility. And it’ll probably continue to hold up strong as we begin to hear about just how hard tariffs will hit earnings.
Though it’s too soon to tell how much damage is to come, I find gold to be a stellar asset to own, especially the gold mining stocks that still seem to be trading at hefty discounts given the current spot price of gold. With shares at new highs, I’d not shy away from the XGD here.
