There might be disagreement on how President Donald Trump's tariff policy will play out. But most will agree that, by design, it will significantly impact the global economic order. So why did we start a position in Vanguard Total Stock International Stock ETF? The chart on VXUS told the tale.
The Waiting Game: Avoiding The Tariff Volatility
VXUS spreads out the global exposure and subtracts the U.S. influence. According to Vanguard's website, the top areas of exposure, in order, are Japan, United Kingdom, China, Canada, France and India. They represent over 53% of the fund.
Granted, international stocks have been dismal relative to the U.S. for more than a decade. Investors thinking international stocks were due for their turn in the spotlight have been disappointed.
As tariff talk ramped up, it certainly added uncertainty to the global picture, but interestingly VXUS was near its 52-week high (1) while U.S. markets had already dropped below their 200-day lines.
Still, once Trump announced proposed tariffs by country on "Liberation Day," there really wasn't any areas of safety. The immediate reaction following the announcement wasn't as bad for VXUS (2) but it quickly got worse (3). It was a big reason why IBD's SwingTrader remained on the sidelines during most of the volatility. The goal wasn't to make big money but to protect capital for subscribers.
Even with the tariff pause announcement on April 9 that sent markets roaring (4), we sat on our hands and avoided the immediate pullback.
VXUS Gets First Mover Advantage
But an interesting thing happened with the international markets. On April 11, markets started looking ready to recover and we started small positions in Invesco QQQ Trust and SPDR S&P 500 ETF Trust. But they didn't look nearly as strong as VXUS on that day as it moved above its April 9 high (5). For comparison, the S&P 500 and Nasdaq composite didn't cross that threshold until April 24 and 25, respectively.
Charts Over News Help You Focus During Market Volatility
Though we got shaken out of our SPY and QQQ positions, we kept VXUS on our radar. By April 17, it was above its 21-day line and just below its 200-day line with a relative strength line at highs (6). Two trading days later, we saw a follow-through day on the Nasdaq composite and S&P 500 but we went with VXUS to start. VXUS joined SwingTrader as it was already above its 200-day line with the U.S. indexes still having a lot of work to do (7).
From Shock To Surge: The V-Shaped Recovery
Another benefit of the VXUS trade was the lower volatility. As we started dipping our toes back in the chilled market waters, we erred on the side of caution and positions with a lower average true range (ATR). It might mean forgoing some highfliers but also means avoiding the higher downside risks that come with the lofty returns.
We ended up shifting to higher ATR positions as the rally firmed up with broader participation. Where did that money come from? Taking profits in some of the slower movers like VXUS. As VXUS seemed to hit resistance around 64, we trimmed the position and eventually exited (8). It was already sharply off its bottom in a "V-shaped" recovery reminiscent of the U.S. recovery during the Covid crash.
That meant we missed some favorable headlines on Friday. Between China's statement of "evaluating" trade talks and its consideration of addressing U.S. fentanyl concerns, international markets had a lot to cheer. VXUS broke out above its March highs (1) in a very "V-shaped" base. But with our exposure ramped up to 80% at Thursday's close, SwingTrader got plenty of participation in the move.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on X, formerly known as Twitter, at @IBD_JNielsen.
