CFRA: ETF Investors Gained from Return to Risk-On

A federal court struck down President Donald Trump's reciprocal tariffs Wednesday afternoon, initially sending Dow futures up 500 points and highlighting how trade policy whiplash has dominated exchange-traded fund performance this year.

The U.S. Court of International Trade ruled that President Trump exceeded his authority when imposing worldwide import levies under emergency powers, according to CNBC reporting. The three-judge panel ordered the administration to immediately stop collecting the tariffs.

The court victory provides temporary relief for ETF investors who have watched their funds swing wildly based on Trump's trade moves. But with the administration already appealing and new tariff threats emerging, the recent rally in risk-oriented ETFs remains fragile.

IBIT, QQQ and SPY Reverse

Trump's tariff roller coaster has created dramatic reversals in ETF performance, according to new research from CFRA. From the start of the year through April 8, when Trump first paused his reciprocal tariffs, major ETFs posted losses, the research firm found.

Then everything flipped. After the April pause, the same funds surged higher in what CFRA called a return to "risk on" investing.

The iShares Bitcoin Trust (IBIT) saw the most dramatic turnaround, swinging from losses of nearly 20% to gains of roughly 45%, according to CFRA data. The Invesco QQQ Trust (QQQ) and the SPDR S&P 500 ETF Trust (SPY) followed similar patterns, with both funds erasing earlier losses and posting double-digit gains, the research showed.

"ETF price returns clearly show U.S. investors benefited from the shift back to risk-taking after tariffs were paused," wrote Aniket Ullal, CFRA's head of ETF research, in the report.

Rate Worries Add to ETF Pressure

Beyond trade uncertainty, rising interest rates are hammering specific sectors of the ETF market, according to CFRA's analysis. The 30-year Treasury yield has climbed above 5% amid concerns about government spending and debt levels.

That's bad news for funds tied to interest-sensitive industries. The SPDR S&P Homebuilders ETF (XHB) dropped 8.1% over the past three months, while the Residential REIT ETF (HAUS) fell 4.6%, CFRA data showed. Even the Vanguard Long-Term Treasury ETF (VGLT) lost 4.4% during that period.

The Breakwave Dry Bulk Shipping ETF (BDRY) took the biggest hit, plunging 17.6% as the capital-intensive shipping sector got squeezed by both higher rates and tariff disruptions, according to the research.

Moody's downgrade of U.S. debt in May and weak demand at a recent Treasury auction have added to investor anxiety about the government's borrowing costs, CFRA noted.

One bright spot has been the weakening dollar, which fell 5% this year through mid-May, according to Federal Reserve data cited in the research. That's boosted currency ETFs, with the Invesco CurrencyShares Japanese Yen Trust (FXY) attracting $434 million and the Invesco CurrencyShares Euro Trust (FXE) pulling in $339 million this year, CFRA reported.