Here's How To Gauge Trump Tariffs' Impact On The Stock Market

Stock SectorMay 31, 20187min9

Key index funds were mixed in the stock market today as the Trump administration’s plans to impose tariffs on aluminum and steel imports from Canada, Europe and Mexico renewed trade war fears.


That weighed heavily on the Dow industrials, sending SPDR Dow Jones Industrial Average (DIA) down nearly 1% Thursday afternoon. The ETF is trying to hold support above its 50-day moving average. The biggest losers included Caterpillar (CAT), Goldman Sachs (GS) and Procter & Gamble (PG), which fell about 2% each.

Only four of the Dow’s 30 stocks bucked the decline. But that underscores the beauty of owning an index fund, instead of an individual stock. Because several blue chips are up and others’ declines aren’t as steep, DIA is down 0.9% instead of, say, 2.4% for Procter & Gamble.

An exchange traded fund offers a simple, low cost and tax efficient way to invest. It also lowers individual-stock risk, since you’re buying a basket of stocks. ETFs trade just like stocks.

Today there are some 2,000 ETFs to choose from across a wide range of categories that cover stocks, bonds, commodities and currencies. And you can further slice and dice based on your preferences, whether you favor growth or value, small-cap or midcap, tech or health care, or a specific country or region.

Choices Aplenty

Below are some key index funds often used as a barometer to find out what’s going on in the stock market for some of those segments.

Let’s start with one of the most widely used bellwethers to track Wall Street’s health: DIA, with $21.5 billion in assets. The Dow is a price-weighted average of 30 blue chip stocks such as Apple (AAPL), Boeing (BA), Caterpillar, General Electric (GE) and McDonald’s (MCD). Many of these are your grandfather’s stocks — they have a large market cap, are actively traded and tend to generate steady earnings growth.

For a broader sampling of the market, there’s the S&P 500 Index, composed of 500 of the biggest U.S. companies trading on the NYSE or Nasdaq.

  • SPDR S&P 500 (SPY), $264.3 billion

If tech stocks are more your flavor, check out the Nasdaq 100 Index, which tracks the 100 stocks with largest market capitalization listed on the Nasdaq, excluding financials. This index is topped by Apple, (AMZN), Microsoft (MSFT), Facebook (FB) and Alphabet (GOOGL).

  • PowerShares QQQ Trust (QQQ) $66.3 billion

For midcap and small-cap segments of the market, here are two commonly watched funds:

  • SPDR S&P Midcap 400 (MDY), $21 billion
  • iShares Russell 2000 (IWM), $46.5 billion

Want exposure to overseas developed markets including the U.K., France, Germany and Japan?

  • iShares MSCI EAFE (EFA), $76.5 billion

Emerging markets has been a hot growth area represented by countries such as China, Korea, Taiwan and Brazil. Alibaba (BABA) and Baidu (BIDU) are covered here:

  • iShares MSCI Emerging Markets (EEM), $37.7 billion


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