It seems like the headlines for the U.S. and China trade deal fluctuate almost daily, with news that a trade deal is close one day and then a story that a deal is nowhere in sight the next. Although it may be a riskier way to manage one’s portfolio, for investors looking to trade the news, this back and forth makes predicting the volatile market a challenging undertaking. With trade talks ongoing, there are a few things investors can scrutinize to potentially predict trade talk outcomes.
According to CNBC, “There are certain stocks investors should focus on over the next two days as the true “tell” on whether talks are making any progress.” These stocks make up what the business news channel refers to as its proprietary China Trade Index, which is used to track companies with the most significant China revenue exposure and most imports from China.
The China Trade index includes the usual trade captains Apple, Nike and Caterpillar in addition to many retail names such as Best Buy, Kohl’s, Honeywell.
As might be expected, the indicator had tumultuous time last week, as companies moved in tandem along with trade headlines. Most recently, it jumped 2% after President Donald Trump said he’s meeting with Chinese Vice Premier Liu He on Friday, recreating dreams of a swift trade resolution.
Goldman Sachs also screened Russell-1000 Index member companies for those with sizable revenue exposure to Greater China, using 2018 company filings. These stocks could also be very susceptible to any indications that the trade talks this week are successful or fruitless.
For investors using ETFs, a similar bellwether might be approximated by looking at ETFs that contain many of the stocks in the China Trade Index and Russell-1000 screened Index.
Investors seeking to make their own ETF trade talk barometer might look at the Consumer Discretionary SPDR (XLY), which follows many of the consumer stocks that could be affected by trade talks, such as Best Buy and Kohl’s.
The VanEck Vectors Semiconductor ETF (SMH) is another to track carefully, as it contains the highly sensitive chip stocks that have proven to be affected by overseas and local news.
Finally, the VanEck Vectors Gaming ETF (BJK) is an ETF to monitor closely, as it tracks the price and yield performance of the MVIS Global Gaming Index (MVBJKTR), which is intended to track the overall performance of companies involved in casinos and casino hotels, sports betting, lottery services, gaming services, gaming technology and gaming equipment, as casinos have shown to be heavily affected by China revenues.
For more market trends, visit ETF Trends.
