Equities are enduring a turbulent spell at the hands of President Trump’s tariff talk. Yes, the White House has backed off of trade levies against Canada, Colombia, and Mexico, for now at least. But China and other countries are in Trump’s crosshairs. That could imply it’s only a matter of time before the president spooks investors again with tariff discussions.
However, that doesn’t mean stocks should be avoided outright. In fact, small-caps and ETFs like the ALPS O’Shares US Small-Cap Quality Dividend ETF (OUSM ) could be shelters from tariff-induced storms.
OUSM, which follows the O’Shares US Small-Cap Quality Dividend Index, is proving durable amid tariff calamity. The ALPS fund is up almost 1% year-to-date. That indicates its focus on quality stocks with favorable volatility traits could pay off for investors in 2025.
Tariffs Could Make OUSM Outstanding
For now, and with China being the exception, Trump appears to be leveraging tariffs more as a negotiating tactic than anything else. Still, as equity market action confirmed earlier last week, trade war speculation unnerves investors.
Those jitters may not prompt market participants to examine smaller stocks and OUSM. But they might want to alter that thinking. Small-caps, including OUSM holdings, usually aren’t reliant on exports. Rather, these companies typically generate the bulk of their earnings and revenue here in the U.S. That means they’re less vulnerable to trade war speculation than their larger counterparts.
Stefano Pascale, head of equity derivatives strategy at Barclays, recently noted that while tariff uncertainty is a drag on large-cap stocks, that scenario could spell opportunity for small-caps. In what could be good news for OUSM, other professional investors agree with Pascale’s assessment, adding that value stocks are another way for dealing with tariff volatility. That’s relevant to investors evaluating OUSM because the ETF has value tendencies.
OUSM Aces Domestic Exposure & Value Test
“Large cap stocks have had quite a run, but we see the market broadening out with new opportunities at hand,” said Emerald CEO Scott Rehr.
When it comes to checking the boxes of domestic exposure and value, OUSM aces that test. The ETF, which has nearly $886 million in AUM, allocates approximately 63% of its roster to financial services, industrial, and consumer discretionary stocks. Those are cyclical value sectors. And in the small-cap universe, nearly all of the companies hailing from those groups have minimal exposure to international markets.
For more news, information, and analysis, visit the ETF Building Blocks Channel.
VettaFi LLC (“VettaFi”) is the index provider for OUSM, for which it receives an index licensing fee. However, OUSM is not issued, sponsored, endorsed or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of OUSM.
