A lot has happened since President Donald Trump took office. One of the most notable things is the sweeping reciprocal tariffs, which shook the economy. While some sectors have been massively affected, some are thriving. If you want to protect your money and possibly grow it, here are the top five best places to invest your hard-earned cash amid the trade war.
Index Funds
During uncertain economic times, such as trade wars, stocks can swing wildly. And since the announcement of reciprocal tariffs, the overall stock market has been shaky. This is why index funds, especially those tracking major benchmarks like the S&P 500 or the Russell 2000, become the best option compared to investing in individual stocks. This is because index funds provide a broad diversification.
Another benefit of investing in index funds is the lower costs (including management fees, turnover ratio, and taxes on capital gains), unlike other types of investment funds. Additionally, index funds offer attractive returns, as they tend to outperform actively managed funds.
Long-term investors can use the market dip as a buying opportunity, scooping up shares in these broad funds at a relative discount.
Gold and Gold Mining ETFs
Gold has historically been a go-to alternative asset during times of economic uncertainty. With over 14% gain since January 2 while most stocks took a nosedive, gold isn’t just a perfect hedge against inflation but also trade wars.
And you don’t have to buy physical bullion to benefit either. Exchange-traded funds like SPDR Gold Shares (GLD) and the iShares Gold Trust (IAU) offer direct exposure to gold prices. GLD’s low expense ratio of 0.25% makes it even more attractive.
Gold mining ETFs are also a good bet during uncertain economic times because mining companies can ramp up production without an added cost. For this reason, the VanEck Gold Miners ETF (GDX) has been on an upward trend since January.
Investment-Grade Bonds
Economic uncertainties, such as trade wars, often shift the Federal Reserve’s decisions. Rate cuts are more likely during such times due to inflationary pressures. And if that happens, investment-grade bonds would be more attractive because the principal value of existing bonds with higher yields goes up.
However, picking individual bonds can be complicated, time-consuming, and expensive. That’s why bond ETFs like Vanguard Total Bond Market ETF (BND) are the best way to diversify your portfolio.
If you’re looking for stability amid the heightened volatility due to the trade war tensions, investment-grade bonds aren’t just a safe haven. They’re smart, strategic plays with upside potential, especially if interest rates drop as trade tensions escalate.
Utilities
Electricity isn’t optional. It’s a necessity. This demand makes the utilities sector one of the most reliable places to park your money during economic turbulence. What makes utilities even more appealing in volatile times is their business model. Although energy products used to generate power may be affected by tariffs, these costs are often passed to the consumer.
Utility stocks tend to operate regional monopolies, meaning less competition. But an ETF like the Utilities Select Sector SPDR Fund (XLU) is a better choice than individual stocks. It includes top-tier names like NextEra Energy (NEE), Southern Company (SO), and Duke Energy (DUK).
Digital Assets
If you’re looking to invest outside traditional markets and have a high risk tolerance, invest in digital assets like Bitcoin and Ethereum. While they’re highly volatile, cryptocurrencies have a track record of being uncorrelated to the stock market.
If you can’t stomach the risk, there are ETFs that give you crypto exposure without investing directly in specific digital assets. SEC-approved ETFs like the ProShares Bitcoin Strategy ETF (BITO) and the Grayscale Bitcoin Trust (GBTC), launched in 2024 as spot Bitcoin ETFs, are perfect.
