This ETF promises to protect your money from the trade war

A new ETF promises to protect your money from the fallout of the trade war. But is that even possible when the trade war touches every company and every consumer?

The consensus view is that it’s hard to escape the effects of a trade war altogether. That’s why when President Donald Trump threatened new tariffs on Mexican imports last week, the Dow dropped more than 350 points.

But the new exchange traded fund TWAR, launched by Charlottesville-based M-Cam International yesterday, promises that its portfolio will be more resilient to a full-blown trade war.

TWAR will track large and mid-cap companies based on their intellectual property and other intangible assets like contracts and licenses, as well as their ability to outperform competitors during a trade war. These companies are also included in M-Cam’s Martin Global Innovation Equity Trade War Index.

Companies that have some government support can serve as defensive investments against structural long-term policy concerns. All stocks that TWAR tracks either have government contracts or are deemed to be significant enough to the US economy, said David Martin, founder of M-Cam.

Its top 10 holdings are General Electric, Cisco, IBM, Edwards Lifesciences, Xerox, AMD, Micron, Dover, Mastercard and Amazon.

Most of the companies are multinational and exposed to global trade, yet their stocks are trading higher in 2019, according to Refinitiv. Xerox is the biggest gainer in the pack and has rallied 69% since the start of the year. Mastercard is laggard, with a 4.5% gain.

But it’s hard to guard against the Trump administration’s trade policy, when no one knows what will happen next. This latest tariff threat came as a surprise for most investors, said JJ Kinahan, chief strategist at TD Ameritrade. “This tells me that everything is on the table” when it comes to trade, he said.

The best way to protect your investments during this time of uncertainty is to diversify. Don’t put all your eggs in one basket and diversify, said Kinahan.

“There is no magic bullet investment. And if there was, everyone would be in it,” he said.

Martin doesn’t expect the new ETF to underperform the market if the trade spat between the United States and China gets resolved.

“We’re talking about this because of [the trade conflict with] China, but the fact of the matter is that these issues are not unique to this moment they’re just getting coverage at this moment,” said Martin.