It feels natural to run to safety whenever the stock market corrects, threatened by tariffs and the potential for an otherwise robust economy to slip into recession. Indeed, the fear is we may just be scratching the surface with this emerging trade war.
And while the endgame is unknowable at this juncture, it certainly seems like investors are scrambling to prep for what could be a nasty, “painful” recession. If you were overweight in the high-growth stocks that have slid by the most, it may be too early to rotate into the defensives, especially if you’re a young investor who should still be going for growth, at least from a long-term perspective.
Indeed, there are two ways to view the latest tariff-driven sell-off. It’s either a wake-up call to rebalance or run the risk of having your portfolio face extra damage, or it’s an opportunity to pick up previously bid-up names at sizeable discounts to their prior highs. Tariffs have overtaken AI as a top story. But in terms of the long-term future of the economy, I still think it deserves as much air time as it received at the start of the year.
In any case, this piece will focus on three growth-focused ETFs for younger investors with strong enough stomachs to brave the market correction. Indeed, it’ll be hard to catch them at the bottom. But as long as you’re willing to feel a bit of pain and feel wrong for a while, the following ETFs are worth a look while they’re down.
Schwab U.S. Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD | SCHD Price Prediction) isn’t yet in a correction, down just 7.6% from its highs. With higher-yielding, lower-beta stocks making up the ETF, it should come as no surprise to learn the SCHD is having a somewhat better time of riding out the recent tariff wobbles. Undoubtedly, the high-multiple tech stocks have been hurting far more than your average dividend-paying U.S. blue chip like those found in the SCHD.
While the SCHD is a more defensive way to play the market, I find the ETF’s allocation to defensive growers to be most promising. Indeed, think about the resilient growers, like those in the healthcare sector, that can keep posting decent numbers as the economy begins dragging its feet.
With top-notch consumer staple names to balance things out, the SCHD stands out as one of the better balanced ETFs out there for investors looking for resilience, dividend growth and yield (3.5% at the time of writing). Maybe the SCHD is better than bonds for younger long-term investors seeking the right balance between growth and stability.
Invesco QQQ Trust
The tech-heavy Invesco QQQ Trust (
) has taken a slightly harder hit amid this tariff-driven sell-off. And while buying the choppier and more-vulnerable QQQ may seem like stepping in harm’s way compared to an S&P 500 ETF, I do think that growth-minded investors waiting for the perfect moment to pounce on all the large-cap AI innovators now have a chance to do so on the cheap.
The QQQ is now down over 13%, with many of its top holdings (think the Magnificent Seven) off more than 20% from their highs. As Jim Cramer and other investors look to “scrap” the Magnificent Seven on the way down, perhaps the most contrarian thing one can do is pick them up as others throw in the towel at an accelerating rate.
Ark Innovation Fund
If the QQQ isn’t enough of a bargain for you, perhaps Cathie Wood’s Ark Innovation ETF (NYSEARCA:ARKK) is, while it’s down close to 30% from its 52-week highs. Undoubtedly, the selling pressure hit fast, but don’t count on Cathie Wood to back away from her long-term game plan.
Recently, she took advantage of the market dip by picking up a wide range of beaten-down stocks — like Coinbase (NASDAQ:COIN), Tesla (NASDAQ:TSLA), Palantir (NASDAQ:PLTR), and Robinhood (NASDAQ:HOOD) — at lower prices. If you’re still a believer in disruptive innovation and are willing to put your faith in Wood, the ARKK ETF looks very interesting while high-multiple stocks take a big dive again.
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