Summary

• Overall European country ETFs had positive returns in the first 5 months in 2019, among which Greece ranking first with a return of 31.9%.
• American and Chinese country ETFs were negatively influenced by the trade war, but recently both are recovering gradually.
• Other Asian countries replying heavily on Chinese companies’ supply chain may also be affected by Trump-Xi trade war, ETFs of Hong Kong, South Korea and Singapore saw the same fluctuation pattern as the one of China.

On May 31st, Charlie Bilello published a table in his twitter, showing the 2019 YTD total returns of various country ETFs. On the first half of 2019, several significant economic incidents happened globally. The trade war between US and China commenced officially, and World Bank has published that the global economic growth is forecast to ease to a weaker-than-expected 2.6% in 2019 before inching up to 2.7% in 2020.  Under this global economic environment, some country ETFs still had an impressive performance. Greece (GREK) led all country ETFs in 2019 with a return of 31.9%.  US (SPY) also saw an outstanding return of 10.6%, ranking 11th among all 48 countries. Influenced by the trade war news, the return of China country ETF (FXI) was only 3.3%, ranking bottom of country ETFs with positive returns.

European country ETFs: A Reflection of Economic Recovery

Overall, European country ETFs had outstanding performances, since they accounted for 60% in top 10 country ETF with most returns while Poland was the only European country that saw a negative return.

On April 30, 2019, BBC published a breaking news, which shows that according to Eurostat, the eurozone area’s unemployment rate was 7.7% in March 2019, down from 7.8% in February 2019 and from 8.5% in March 2018. This is at the lowest level since records of the current data set had began in 2000. Meanwhile, seasonally adjusted GDP rose by 0.4% in the eurozone and by 0.5% in the wider EU, which are both higher than same period last year. Together these news give us an idea that the European economy is in slow recovery, thus making ETFs tracking these countries’ market index go up.

US and China ETFs:  A Reflection of the Trade War

In the first 4 months in 2019, both the USA and China country ETFs had outstanding performances in returns: For iShare China large-cap ETF (FXI), it had a high return of 13.87% YTD on April 30; For SPDR S&P 500 ETF (SPY), it even performed better with a return of 18.68% YTD on the same day.

On Sunday May 5 2019, Trump stated that the previous tariffs of 10% levied in $200 billion worth of Chinese goods would be raised to 25% on May 10. China responded this action 3 days later by declaring that from June 1, 2019, it would raise tariffs on $60 billion worth of US goods.

US tariffs on Chinese exports will mainly apply to electronic units, telecommunications equipment, precision instruments and furniture. Counter-tariffs by China will hit US agricultural commodities, autos and aquatic products. Both iShare China large-cap ETF and SPDR S&P 500 ETF experienced a decrease after tariff increase news release. The USA country ETF dropped slightly and continuously returned late in June while the one of China decreased dramatically and is still fluctuating these days.

The trade war between the US and China also influence other Asian countries, especially those countries which rely heavily on Chinese companies’ supply chain. According to Financial Times, Indonesia’s exports were down 4.3 per cent in the first quarter, with Japan’s exports dropping 2.3 per cent and South Korea’s 7.1 per cent lower. Countries like Canada, Mexico and Colombia may suffer from Chinese tariffs. Although most Asian countries in previous table show positive returns, the decline in exports will definitely affect the future performance of country ETFs. In fact, EWH (Hong Kong ETF), EWY(South Korea ETF) and EWS(Singapore ETF) are all experiencing the same decrease-return pattern as China country ETF is doing now.

ETF Performance Predicted by I Know First

How to interpret this diagram.

On March 8 2019, I Know First algorithm successfully predicted 8 out 10 ETF movements. FAS, tracking the Russell 1000® Financial Services Index, was the top performing prediction with a return of 19.37%. TQQQ (NASDAQ-100 IndexÂ) and KIE  (S&P Insurance Select Industry Index) saw outstanding returns of 13.63% and 9.14%. What’s more, SSO (S&P 500 index) and NUGT (NYSE Arca Gold Miners Index) also had nice returns with 8.59% and 8.38% respectively. With these notable trade returns, the package itself registered an average return of 6.84% compared to the S&P 500’s return of 4.53% for the same period.

All of these 8 ETFs track stable and robust stock indexes such as S&P 500 index, S&P Insurance Select Industry Index and S&P Information Technology Index. Influenced by the trade war between US and China, people tend to invest in traditional industries with lower risk such as insurance and gold miner.