Biggest ETF Stories Of 2018 Worth Watching In 2019

After a blockbuster start to 2018, Wall Street has been caught in a vicious circle of trading with volatility and uncertainty taking center stage. While a combination of factors like surging corporate profits, booming growth, and new tax legislation fueled a rally, inflation fears, the surge in yields, tech selloff, concerns over a slowdown in global growth and most specifically tariff tantrums weighed on stock returns.

Below we discuss some of the events that dominated the headlines in 2018 and are worth watching in 2019:

Tariff Tantrums

Trade war fears initially surfaced in March when Trump levied a 25% tariff on steel and aluminum imports on countries around the world. The action prompted a retaliatory action from U.S. allies and tit-for-tat import tariffs. The turmoil intensified when Trump unveiled 25% tariff on Chinese goods worth $50 billion, 10% on $200 billion Chinese goods starting Sep 24 and threatened to add a third round of tariffs on another $267 billion of Chinese imports. All these led to retaliation from China and escalation in trade woes between the two countries, leading to threats of a global slowdown.

While most of the ETFs suffered, semiconductor ETFs took a huge beating. Invesco Dynamic Semiconductors ETF (PSI - Free Report) and VanEck Vectors Semiconductor ETF (SMH - Free Report) tumbled the most, losing in double digits this year. Both the funds have a Zacks ETF Rank #3 (Hold).

However, in the latest Group of 20 meeting in Argentina, Trump agreed to halt new tariff for 90 days while China agreed to boost purchases of U.S. agricultural goods to reduce trade imbalance between the two countries. Further, both the United States and China kicked off a new round of trade talks, per the Wall Street Journal report. China is working to replace its Made in China 2025 plan with a new program promising greater access to foreign companies.

Fed Raises Rates, Offers Dovish View

The Fed has raised interest rates four times this year - March, June, December, and September and trimmed its 2019 rate hike outlook from three to two in the latest FOMC meeting. While rate hikes boosted yields for most of this year, the dovish outlook will provide relief to Treasury bonds and rate sensitive ETFs.

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