EDITOR: | June 28th, 2019 | 1 Comment

Winners from the US-China trade war (so far)

| June 28, 2019 | 1 Comment
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Trade wars – What will happen next? What will happen this week at the G20? Who are the winners of the trade war so far!

The US-China trade war has been ongoing for about a year now so I decided to take a look at the winners so far. It would stand to reason that if the trade war worsens these winners will continue to do well. Generally speaking US equities and defensive sectors have done well, whereas anything China related (includes many mining stocks) have done very poorly. Of course should the trade war be solved, the past years losers are likely to recover strongly.

The US share market has done well with China’s share market doing poorly

The US equity market has been the clear winner (shown below in blue) as it is up 8.95% over the past year compared to the iShares China (red) which is down 10.67%. Note I chose the iShares China as it is in USD currency and hence it removes the currency effect for this comparison.

US domestic sectors have done well the past year

As we would expect US sectors that have no direct trade war exposure have done well. Returns quoted below are the past 1 year returns as of June 20, 2019. US real estate and utilities were big winners, with consumer staples and health care not far behind.

  • US real estate up 21.7%
  • US utilities up 19.1% – iShares U.S. Utilities ETF (IDU) – PE 22.0
  • US Consumer staples up 15.9% – PE 25
  • US health care up 14.7% – iShares U.S. Healthcare ETF (IYH) – PE 26.5
  • US manufacturing up 6% – iShares US Industrials ETF (IYJ) – PE 21
  • US consumer goods up 3.2% – iShares U.S. Consumer Goods ETF (NYSEARCA: IYK) – PE 19.0
  • Some of US stocks the past year – Advanced Micro Devices (AMD) up 93%, Chipotle Mexican Grill Inc. (CMG) up 56%, Zerox Corp (XRX) up 32%, and Amazon (AMZN) up 11.3%.

US sectors 1 year returns comparison (as of March 8, 2019)

US sectors 1 year returns to March 8, 2019

Global winners so far from the trade war

Vietnam – Vietnam is starting to benefit as the trade war worsens and firms start to relocate from China to Vietnam. The VanEck Vectors Vietnam ETF (VNM) is up 11.5% year to date.

Gold – Gold has just hit year highs on fears the trade war may soon get much worse. Physical gold funds such as the SPDR Gold Trust ETF (GLD) was up 9% the past year, whereas the iShares MSCI Global Gold Miners ETF (RING) was up 14.4% over the past year.

Miscellaneous – Airbus (EADSY) has done well at Boeing’s (BA) expense, non-US soybean exporters (Brazil, Argentina) have done well, and the non-Chinese rare earth exporter Lynas Corporation (ASX:LYC) and other rare earths companies may do well if China bans rare earth exports to the USA. For more on the later investors can read “A rare earths war – What should investors do next?”

Top performing InvestorIntel members in the past year

The past year trade disputes have been ongoing between the US and several other countries and not just China. For example, the US has had disputes with Canada, Mexico, Europe, Turkey, Japan, and India.

Trump and Xi have agreed to an extended meeting at next week’s G20 Summit on June 28/29 in Japan, so we will see very soon what happens next. It might be time to fasten your seat belt.


Matthew Bohlsen

Editor:

Matthew Bohlsen holds a Graduate Diploma in Applied Finance and Investment (similar to CFA), and a Graduate Diploma in Financial Planning. He has 30 years ... <Read more about Matthew Bohlsen>


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Comments

  • Geo

    “Physical gold funds such as the SPDR Gold Trust ETF (GLD) was up 9% the past year”

    I’ve been trying to do my due diligence into the SPDR Gold Trust (GLD). Anyone know why there is a clause in the GLD prospectus that states GLD has no right to audit subcustodial gold holdings? Why would the organizations behind GLD forfeit this right and create such a glaring audit loophole? I have not heard a single good reason for the existence of this loophole thus far. It also doesn’t help that GLD claims to be fully backed by physical gold bullion but yet it refuses to give retail investors the right to redeem for any of these ‘claimed’ gold bullion. There are a number of other red flags as well from what I’m reading:

    “Did anyone try calling the GLD hotline at 866 320 4053 in search of numerical details on GLD’s insurance? The prospectus vaguely states “The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody.” When I asked about how much of the gold was insured, the representative proceeded to act as if he didn’t know and said they were just the “marketing agent” for GLD. What kind of marketing agent would not know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors.”

    “I remember there was a well documented visit by CNBC’s Bob Pisani to GLD’s gold vault. This visit was organized by GLD’s management to prove the existence of GLD’s gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on the most recent bar list at that time. It was later discovered that this “GLD” bar was actually owned by ETF Securities.”

    June 28, 2019 - 9:27 PM

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