Investors flocked to US bonds, which are still viewed as some of the most stable assets in the world, despite all the political turmoil. The yield on the benchmark 10-Year Treasury, which moves in the opposite direction of prices, fell Tuesday as investors bought more of Uncle Sam's debt. Yield for other shorter and longer term bonds also dipped Tuesday.
The US dollar also gained ground, but the price of gold fell Tuesday along with the broader market. Many investors view gold as a safe haven, because it's a physical commodity tied to supply and demand -- not the whims of global central banks,
Investors don't need to limit themselves to bonds, commodities and currencies. Experts said there are some stocks that might hold up during the tumultuous times as well.
The dip in US bond yields could make dividend-paying stocks more attractive to investors seeking the security of fixed income.
To that end, Verizon (VZ) -- which pays a dividend that yields 4.9% -- was up nearly 2% Tuesday even as the Dow fell 400 points. Utilities and real estate investment trusts, sectors that also pay big dividends, were holding up well Tuesday too.
The rest of the market wasn't doing so well. But Tom Essaye, founder of investment research firm The Sevens Report, said in his daily market newsletter Tuesday that investors should still focus on companies with a lot of exposure to the US economy.
"If trade wars do escalate, the entire market is going to come under pressure, but even in the "Ugly" scenario, sectors with a domestic US focus should at least relatively outperform the broad market," he wrote.
Regional banks should far better than multinational banking giants like JPMorgan Chase (JPM)and Citigroup (C), Essaye says. He recommends the SPDR S&P Regional Bank ETF (KRE). Top holdings include Cleveland's KeyCorp (KEY), Memphis-based First Horizon (FHN) and M&T Bank(MTB), which is headquartered in Buffalo.
"Most regional US banks have virtually no overseas exposure, and as such should at least relatively outperform in a trade war environment," Essaye wrote.
Essaye also said that US homebuilders like Toll Brothers (TOL), Lennar (LEN) and Hovnanian(HOV) could hold up better than the overall market too. So could US-focused oil companies in the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
Smaller US companies, which tend to have less international exposure, could fare well even as fears of a trade war on multiple fronts increase.
That's a key reason why the Russell 2000, an index that focuses on small domestic stocks, actually rose on Monday and was down less than the broader market Tuesday. The Russell 2000 is up 10% this year, while the Dow is now in the red for 2018.
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