Trump Tariffs: The US's tech-heavy index, Nasdaq entered into correction territory as Trump's flip-flop stance on tariff policy gave rise to uncertainty in investors' minds. The index fell over 10.5% from its all-time-high of 20,204.58 level mark.
Earlier this week, Trump announced a one-month pause on the imposition of tariffs on imports from Mexico and Canada. While this delay has been implemented only on certain goods, investors viewed it as a sudden adjustment triggering uncertainty in an already blurry outlook.
Dow Jones and S&P 500 also plummeted by nearly 1% and 1.78%, respectively, earlier this week. The S&P 500 index is now down by over 6% from its all-time-high, touched just earlier this year.
As the US's tariff policy continues to hit the global trade sphere, its execution is creating turbulence globally. Even for the US itself, analysts are expecting an increased inflation rate as other nations start implementing retaliatory measures. The Federal Reserve's slower-than-expected pace of interest rate cuts might just dampen the outlook further.
Hang Seng Comes on Top
Even as the US stock market went on a downward trajectory, the investor sentiment remained relatively fine for the dragon. Japan's Nikkie also fell over 1.8% or nearly 700 points as investors remained cautious.
Meanwhile, China's broader market index, CSI 1000 was trading in green, even as global markets declined. Hong Kong's Hang Seng index surpassed the psychological 24,00 level mark. On Thursday, the index was trading around 24,400 level, up by over 0.41% or 100 points.
Despite the overall downtrend in global markets, there are certain pockets of the market that are performing well.
Low-Volatility ETFs
More than the market's bearish mood, what is hurting investor sentiment is uncertainty and its eventual product: market volatility. As investors and analysts struggle to gauge the implied volatility in the stock market, the unclear outlook is fueling panic, which is in-turn leading to a sell-off.
Low-volatility market instruments continue to gain momentum as investors turn more risk-averse. Infact, these instruments, especially low volatility exchange-traded funds (ETFs) are outperforming the stock market big time.
The Invesco S&P 500 low-volatility ETF has delivered returns of over 5.6% on year-to-date basis. The MSCI USA min-vol factor ETF (USMV) has also followed the cue in terms of strong performance.
As per Bloomberg Intelligence, low-volatility instruments have become the best-performing investment theme so far this year.
