Five safe haven ETFs amid tariff uncertainty
While markets experience the whiplash effects of record tariffs followed by a 90-day tariff pause, fund selectors face the unenviable task of smoothing out the risk-return profile of client portfolios.
Following the introduction of the steepest raft of tariffs by a US President since the 1930 Smoot-Hawley Tariff Act, the S&P 500 last week booked its worst session since March 2020 at the height of COVID-19 volatility.
Early signs of a breakdown in long-standing globalised trade dynamics were followed by some commentators questioning whether we were observing the start of the collapse of the Bretton Woods system as non-US central banks began offloading their US Treasuries.
Within a week, however, US President Donald Trump backtracked on the aggressive roll-out of trade levies, announcing a 90-day pause on tariffs on 75 countries, while notably increasing tariffs on China to 125%.
Against this backdrop of daily economic policy change and what Panmure Liberum strategy chief Joachim Klement previously said would be accompanied by “daily changes in share prices”, ETF Stream offers five potential routes to cushion returns against a tumultuous geopolitical stage.
iShares € Cash UCITS ETF (YCSH)
Our first safe haven ETF is the freshly launched YCSH, while BlackRock describes as Europe’s first actively managed short-term money market fund regulated ETF.
Intended to rival other longer-standing ETFs appealing to institutional and retail investors alike by offering liquid access to income with minimal duration risk, the ETF launched at a money market yield of 3.12% gross annualised and has returned 3.9% so far in 2025.
The ETF achieves this by providing exposure to short term instruments adhering to European MMF regulation (MMFR), with BlackRock’s International Cash Management team responsible for actively adjusting the portfolio’s duration, credit exposure and liquidity profiles.
Amid tariff uncertainty, products such as YCSH provide a nimble shelter for investors looking to park cash and earn income while minimising exposure to interest rate fluctuations on the back of anticipated revisions to economic growth and inflation forecasts.
Invesco Physical Gold ETC (SGLD)
Our second pick is SGLD, offering low-fee exposure to the oldest safe haven asset, this physically backed exchange traded commodity (ETC) will serve as a store of value as markets fear slower growth, rising inflation and political risk.
Investors often rush to the precious metal during periods of volatility, such as recessions, given it has limited correlation to equities. In fact, gold rallied 18% during the first seven months of 2008 while the S&P 500 fell 37%.
While gold sits at an all-time-high price and has climbed more than 2% on Wednesday alone, investors – including central banks – are increasingly turning to the precious metal as a diversifier as well as an alternative to US Treasuries.
Another uncorrelated alternative, bitcoin – which has been touted as ‘digital gold’ – has fallen from its previous heights of last December when it hit $109,000 – it has since corrected to $74,000 at the time of writing.
Xtrackers MSCI World Consumer Staples UCITS ETF (XDWS)
Consumer staples strategies including XDWS could provide some relative stability within investors’ equity buckets.
Images of shoppers scrambling for toilet paper during the early days of the COVID-19 pandemic serve as a lasting reminder of the enduring necessity of everyday essentials. Even as tariffs feed through into higher goods prices, consumer staple brands have a unique business moat which could prove attractive come earnings season.
Opting to avoid an entirely US focus, our pick – XDWS – has a global lens and provides market cap-weighted exposure to large and mid cap names including Costco, Proctor and Gamble (P&G), Unilever, Walmart and Colgate.
In the same breathe, a utility ETF – such as the Amundi S&P Global Utilities ESG UCITS ETF (WELQ) – also deserves a mention under the same bracket with inelastic demand for essential services such as electricity, water and gas.
Xtrackers MSCI World Utilities UCITS ETF (XWUS)
In the same breath, DWS also offers a competitively priced utilities ETF, providing exposure to another sector full of ‘steady compounders’, owing to the inelastic demand for essential services such as electricity, water and gas.
Utilities also provide strong income potential, with XWUS’s underlying index currently boasting a dividend yield of 3.56%, ahead of the 3.47% offered by the MSCI World High Dividend index.
As James McManus, CIO at Nutmeg, previously told ETF Stream: “The utilities sector is often viewed by some market participants as a bond proxy – due to its defensive nature and the reliability of income streams in the sector.”
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