Tariff Tiff Sours ETF That Once Soared on the `Bolton Trade'

(Bloomberg) -- One exchange-traded fund is teaching investors a hard lesson: Political gain can very quickly turn to political pain.

The $5.7 billion iShares U.S. Aerospace & Defense ETF, ticker ITA, slumped 2.6 percent as of 9:14 a.m. in premarket trading in New York as the industry found itself in the crosshairs of tit-for-tat tariffs between China and the U.S. The fund had added as much as that on March 23 after U.S. President Donald Trump tapped John Bolton, an outspoken Iran hard-liner, as his national security adviser.

Much of the slump came from a tumble of more than 4 percent in premarket trading by Boeing Co., which accounts for more than 10 percent of the ETF’s holdings. United Technologies Corp., the fund’s second-largest component and a producer of aircraft engines, tumbled as much as 3.8 percent before the open.

“Boeing jet exports are in danger,” Chris Rupkey, chief financial economist at MUFG Union Bank in New York, said in an emailed note. “The same Boeing that added more than any other of the 30 Dow Industrial companies the last six months to the stock market rally.”

The SPDR S&P Aerospace & Defense ETF, ticker XAR, which also temporarily advanced on Bolton’s appointment, was little changed before the open. Its exposure to Boeing is far less concentrated, accounting for roughly 3 percent of the portfolio.

To contact the reporters on this story: Rachel Evans in New York at revans43@bloomberg.net, Sarah Ponczek in New York at sponczek2@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Andrew Dunn, Brendan Walsh

©2018 Bloomberg L.P.