A Wall Street firm pinpointed 8 corners of the market most vulnerable to trade war-induced chaos

Nicolas Asfouri/AFP/Getty ImagesChina’s President Xi Jinping (L) and US President Donald Trump attend a welcome ceremony at the Great Hall of the People in Beijing on November 9, 2017.
  • US stock indices may be trading just below record highs, but they have taken a hit over the past year as a direct result of the trade war between the US and China.
  • Under the surface, each segment of the equity market – particularly trade-sensitive industries like agriculture and aerospace – has reacted to trade-war developments in different ways.
  • Deutsche Bank equity strategists have pinpointed exchange-traded funds most vulnerable to trade rhetoric, based on their analysis of flows data, in a new guide for investors.
  • Visit Markets Insider’s homepage for more stories.

On the surface, the stock market seems to have shrugged off headwinds introduced by the US-China trade war. The major US indices are within striking distance of their all-time highs, and just posted their best weeks of 2019.

But a new industry-level analysis shows investors have fled corners of the market tossed and turned by the trade dispute even as the broader markets have recovered.

Exchange-traded funds associated with trade tensions saw increased activity in May, a particularly brutal month for equities, according to a Deutsche Bank analysis of exchange-traded fund (ETF) flows over the last two years.

The firm created a guide detailing some of the large ETFs that have seen notable flows on trade war “angst” – and are likely to see further volatility this month amid ongoing tensions between Washington and Beijing.

Equity fund outflows closely correlated with trade war developments.Deutsche BankEquity fund outflows closely correlated with trade war developments.

Strategists Chin Okoro and Hallie Martin narrowed in on the eight stock markets or sectors they deemed most sensitive to trade rhetoric: the Chinese market, semiconductors, Mexican equities, agriculture, metals and mining, electronics, aerospace, and retail.

“DB economists expect trade tension to escalate further in June, highlighting retaliatory actions by China in response to US measures against Huawei,” the firm wrote. “Furthermore, any signs of placating ongoing tensions would likely materialise post G20 summit.”

Markets Insider selected one ETF from each of the trade-sensitive industries Deutsche Bank laid out, and broke them down below. The ETFs are ranked from worst performing to best performing:

VanEck Vectors Gaming ETF

Alberto E. Rodriguez / Getty Images

This fund tracks: Stocks in the gaming, sports betting, and gaming technology industries

1-year performance: -26%



This fund tracks: Stocks in the retail space, including apparel and department store names

1-year performance: -17%

iShares China Large-Cap ETF


This fund tracks: Chinese equities

1-year performance: -15%

iShares PHLX Semiconductor ETF


This fund tracks: Semiconductor stocks

1-year performance: -1.5%

VanEck Vectors Agribusiness ETF


This fund tracks: Stocks in the agricultural industry like agri-chemicals, fertiliser, and seeds

1-year performance: -0.2%

iShares MSCI Mexico ETF


This fund tracks: Mexican equities

1-year performance: +1%

VanEck Vectors Gold Miners ETF


This fund tracks: Gold miner stocks

1-year performance: +2.5%

SPDR S&P Aerospace & Defence ETF


This fund tracks: US-listed aerospace and defence stocks

1-year performance: +10%


Trump’s tariffs are inflicting pain and uncertainty across the market. Comments from very different American companies show how.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.