ETF Investors Favor Global, Low-Volatility Funds Amid Tariff Delays

The exchange-traded fund (ETF) landscape is undergoing significant shifts this week, driven by U.S. trade policy, sector earnings reports, and growing investor appetite for diversification and stability. With President Trump’s decision to delay harsh EU tariffs, and mixed expectations in tech and industrial sectors, ETF flows are adapting to hedge risk and seize emerging opportunities.

Tariff Postponement Spurs Equity ETF Rally

U.S. equity ETFs surged after President Trump announced a delay on a proposed 50% tariff on EU goods until July 9. The SPDR S&P 500 ETF Trust (SPY) jumped 2.08%, closing at $591.15 on May 27, while the tech-heavy Invesco QQQ Trust (QQQ) climbed 2.3%, reflecting renewed optimism in technology and consumer discretionary sectors. This rally signals confidence in near-term equity prospects as geopolitical tensions temporarily ease.

Despite broader gains, the semiconductor space remains cautious. The VanEck Semiconductor ETF (SMH) has seen muted movement, with investors closely watching Nvidia’s earnings report. Options activity in SMH suggests a wait-and-see attitude, as Nvidia’s results are expected to shape AI-related ETF valuations for weeks ahead.

Meanwhile, industrial-focused ETFs are benefiting from the same tariff delay. The Industrial Select Sector SPDR Fund (XLI) rose over 1%, with companies like Deere and Trane Technologies delivering strong earnings. The sector’s performance may indicate a renewed interest in traditional cyclical plays as economic confidence stabilizes.

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Global Diversification and Low-Volatility Funds Gain Popularity

Beyond U.S. borders, BlackRock has reported significant inflows into ETFs focused on Japan, Australia, and emerging markets excluding China. With uncertainty over domestic fiscal policy and inflation, institutional investors are diversifying internationally to hedge exposure. Fixed income ETFs are also shifting, with short-duration U.S. Treasuries and Asian credit markets drawing new interest due to rising U.S. bond yields and demand for safer returns.

Low-volatility ETFs have outperformed in 2025. The iShares Edge MSCI Min Vol USA ETF (USMV) has gained 4.1% year-to-date, led by stable names like Coca-Cola and Berkshire Hathaway. As investors brace for ongoing volatility, these funds provide a defensive play with steady upside.

Additionally, the commodity segment is heating up. The VanEck Junior Gold Miners ETF (GDXJ) has returned over 15% in the past month amid rising gold prices and demand for safe-haven assets. This trend reflects broader market caution despite equity rebounds.

Investors are also exploring newer ETF categories. Active ETF launches and collateralized loan obligation (CLO) ETFs are gaining traction, showcasing the market’s appetite for alternatives that provide adaptive strategies and risk-adjusted yield potential.