EU-US Trade Deal Hopes to Boost These ETFs

After logging a weekly decline, Wall Street is set to rebound on the likelihood of an EU-US trade deal following the tariff delays. SPDR S&P 500 ETF Trust SPY, Invesco QQQ QQQ, Technology Select Sector SPDR Fund XLK, Industrial Select Sector SPDR Fund XLI and Vanguard FTSE Europe ETF VGK are set for big moves. 

The European Union agreed to accelerate tariff negotiations with the United States, easing fears of a trans-Atlantic trade war. The decision came after President Trump announced that the United States would postpone the implementation of a 50% tariff increase on all EU products, from June 1 to July 9, to allow time for further talks.

In a social media post on Friday, Trump threatened to impose a 50% tariff on EU goods, criticizing the 27-member bloc as “very difficult to deal with” on trade and claiming that negotiations were “going nowhere.” The tariffs were set to take effect on June 1. Additionally, Trump warned that all smartphones made outside the country, including Apple’s AAPL iPhone and Samsung devices, could soon face a 25% import tax if not manufactured in the United States (read: Volatility ETFs Spike on Renewed Trump Tariff Threats).

ETFs in Focus

SPDR S&P 500 ETF Trust (SPY)

SPDR S&P 500 ETF Trust holds 504 stocks in its basket, with each accounting for no more than 7% of the assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, financials, healthcare and consumer discretionary accounting for a double-digit allocation each. SPDR S&P 500 ETF Trust has an AUM of $608 billion and charges 9 bps in fees per year. It trades in an average daily volume of 65 million shares and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (see: all the Large Cap Blend ETFs here).

Invesco QQQ Trust (QQQ)

Invesco QQQ Trust provides exposure to the 101 largest domestic and international non-financial companies listed on the Nasdaq by tracking the Nasdaq 100 Index. It is one of the largest and most popular ETFs in the large-cap space, with an AUM of $330.5 billion and an average daily volume of 44.3 million shares. QQQ charges investors 20 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Select Sector SPDR Technology ETF (XLK)

Select Sector SPDR Technology ETF is the most popular and liquid ETF in the technology space, with AUM of $72.4 billion and an average daily volume of 5 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 69 securities in its basket and charges 8 bps in fees per year from investors. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: 3 ETF Strategies to Follow on Temporary U.S.-China Trade Deal).

Industrial Select Sector SPDR (XLI)

Industrial Select Sector SPDR targets the broad industrial sector and follows the Industrial Select Sector Index. XLI holds 79 stocks in its basket and is well spread out across sectors, with aerospace & defense, machinery, and ground transportation making up for a double-digit share each. Industrial Select Sector SPDR is the most popular ETF with AUM of $21 billion and an average daily volume of around 7 million shares. It charges 8 bps in fees per year and has a Zacks ETF Rank #1 with a Medium risk outlook.

Vanguard FTSE Europe ETF (VGK)

Vanguard FTSE Europe ETF offers exposure to companies located in the major markets of Europe by tracking the FTSE Developed Europe All Cap Index. It holds a broad basket of 1241 stocks with key holdings in financials, industrials, health care, and consumer discretionary sectors. Vanguard FTSE Europe ETF has AUM of $25.1 billion and trades in an average daily volume of 3.5 million shares. It charges 6 bps in annual fees and has a Zacks ETF Rank #1 with a Medium risk outlook.

Bottom Line

While the delay in tariff implementation has provided a temporary reprieve, investors should brace for more volatility ahead as the potential for a trade war has not completely dissipated.
 

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