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4 Quality ETFs in Focus Amid Growing U.S.-China Trade Tensions

By Sanghamitra Saha | October 16, 2025, 6:00 AM

President Donald Trump on Wednesday indicated that trade tensions with China remain elevated. His stance came even as Treasury Secretary Scott Bessent suggested that an extension of the current tariff pause between the United States and China is possible, as quoted on Yahoo Finance. Trump is still expected to meet Chinese President Xi Jinping later this month.

Rising Tensions Despite Hopes of De-escalation

Over the past week, relations between the two countries have soured, though mixed signals continue to emerge about how severe the outcome of this dispute may become.

On Friday, Trump announced plans to impose an additional 100% tariff on Chinese goods starting Nov. 1, in response to Beijing’s new export controls on rare earth minerals. This caused a crash in Wall Street on Friday.

At the start of this week, however, markets briefly rallied after Trump hinted at a possible easing of tensions. But the optimism eroded quickly after China sanctioned U.S. units of a South Korean shipping company. Meanwhile, Trump warned of further trade restrictions in response to Beijing’s halt on U.S. soybean purchases, the same Yahoo Finance article noted.

How Will Wall Street Behave If Tensions Linger?

U.S. stocks could fall as much as 11% if trade tensions between the United States and China aren’t resolved before the November deadline, according to Morgan Stanley’s Michael Wilson, per Bloomberg, as mentioned on Yahoo Finance. The firm’s chief U.S. equity strategist said the market may be heading into a pullback due to high valuations and high investor exposure.

Bear-Case Scenario: S&P 500 to Hit 5,800-6,027

In the above-mentioned source, Morgan Stanley’s Wilson warned that continued trade uncertainty into November could drive the index down to 5,800-6,027 points — an 8-11% decline from last Friday’s close, as renewed trade tensions emerged as a shocker to many.

Note that a measure of market volatility, Barclays iPath Series B S P 500 VIX Short Term Futures ETN Series B VXX, has gained 5.9% over the past month and surged 10.9% over the past week.

Why Quality Investing Matters Now

Quality stocks are rich in value characteristics with healthy balance sheets, high return on capital, low volatility, elevated margins, and a track record of stable or rising sales and earnings growth. These stocks thus reduce volatility when compared to plain vanilla funds and hold up rather well during market swings.

Quality ETFs in Focus

Against this backdrop, below we highlight a few quality exchange-traded funds (ETFs) that have surpassed the S&P 500’s performance over the past month (as of Oct. 15, 2025). SPDR S&P 500 ETF Trust SPY added 0.78% over the past month and has lost 1.24% over the past week.

BetaShares S&P 500 Equal Weight ETF QUS – Up 3.0% Past Month; Up 0.6% Past Week

The underlying MSCI USA Factor Mix A-Series Capped Index seeks to measure the equity market performance of large and mid-cap companies across the U.S. equity market. The fund charges 15 bps in fees.

Invesco S&P 500 Quality ETF SPHQ – Up 1.28% Past Month; Down 0.73% Past Week

The underlying S&P 500 Quality Index tracks the performance of stocks in the S&P 500 Index that have the highest quality score, which is calculated based on three fundamental measures — return on equity, accruals ratio and financial leverage ratio. The fund charges 15 bps in fees.

iShares MSCI USA Quality Factor ETF QUAL – Up 4.13% Past Month; Up 0.28% Past Week

The underlying MSCI USA Sector Neutral Quality Index is based on a traditional market capitalization-weighted parent index, the MSCI USA Index, which includes U.S. large and mid-capitalization stocks. The fund charges 15 bps in fees.

iShares MSCI Intl Quality Factor ETF IQLT – Up 1.22% Past Month; Down 0.76% Past Week

The underlying MSCI World ex USA Sector Neutral Quality Index seeks to capture the performance of stocks deemed by MSCI Inc by identifying common stocks with high quality scores based on three main fundamental variables: high return on equity, stable year-over-year earnings growth and low financial leverage, while maintaining reasonably high trading liquidity, investment capacity and moderate index turnover. The fund charges 30 bps in fees.

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SPDR S&P 500 ETF (SPY): ETF Research Reports
 
iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX): ETF Research Reports
 
iShares MSCI USA Quality Factor ETF (QUAL): ETF Research Reports
 
iShares MSCI Intl Quality Factor ETF (IQLT): ETF Research Reports
 
Invesco S&P 500 Quality ETF (SPHQ): ETF Research Reports
 
SPDR MSCI USA StrategicFactors ETF (QUS): ETF Research Reports

This article originally published on Zacks Investment Research (zacks.com).

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