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Week of June 3rd, 2019
It’s been another week of “fun” in the markets.
Volatility and fears of further downside picked up momentum Friday after President Trump said he would impose a 5% tariff on all Mexican imports. At the moment, tariffs will take effect on June 10, 2019 and remain in place until “illegal immigrants coming through Mexico, and into our Country, STOP,” he tweeted.
That tariff could increase to 10% by July 1, 2019 if Mexico fails to comply. By August 1, 2019, it could increase to 15%. By September 1, 2019, it could increase to 20%. And by October 1, 2019, it could increase to 25%.
One of the companies impacted by this news is Chipotle (NYSE:CMG) since tariffs could have a big impact on the avocado trade. The U.S. imported more than 85% of its avocados from Mexico just in 2018. Avocado prices have already more than doubled in the last two months.
Here are some of the top stocks to watch:
Opportunity No. 1
ProShares Ultra VIX Short-Term Futures ETF (UVXY)
The UVXY provides leveraged exposure to the S&P 500 VIX Short-Term Futures Index that are 1.5x the return of its underlying benchmark. With market volatility rising, and markets slipping on trade war escalation, one of the best ways to hedge for downside is with a stock that tracks the volatility index.
Opportunity No. 2
iPath S&P 500 VIX Short-Term Futures ETN (VXX)
The VXX is another smart way to trade elevated volatility. With the trade war not likely to come to an immediate-term end, this is a great way to hedge for potential swings lower in markets.
Opportunity No. 3
ProShares UltraShort S&P 500
This is another great way to trade market volatility and potential downside. The SDS seeks two times (2x) leveraged inverse exposure to the index, charging 90 bps in fees. It is also relatively popular and liquid having $947.7 million in AUM.