Global Market Turbulence Spells Trouble for This ETF

The two sides in the ongoing trade spat between the United States and China have delivered mixed signals in the month of May.

In the early spring it appeared as if a deal was imminent, but core disagreements have prevented a breakthrough. Both countries have reported weaker retail sales and industrial production for the month of April, and this is before more draconian trade measures have been enacted.

Investors should expect more turbulence in global markets as this trade dispute heats up. The iShares Core MSCI All Country ex Canada Index ETF (TSX:XAW) aims for global portfolio diversification and is designed to be a long-term holding.

Altogether about 60% of its holdings are in the United States and China. Shares of the ETF were up 0.31% in late afternoon trading on May 15.

Earlier this year the International Monetary Fund (IMF) projected that 70% of countries would suffer a slowdown in growth compared to 2018, where much of the world saw a marked increase.

This growth slowdown has not translated to poor market conditions, quite the contrary, North American markets have enjoyed fantastic gains to start the year.

This ETF and other global-focused funds are a risky bet as we enter the second leg of May. Shares are up 9.5% year-to-date but the ETF has dropped 2% in value over the past two months. Investors should consider taking profits in what has become a broadly overvalued market.