Traders work at the New York Stock Exchange in New York, the United States, Aug. 1, 2019.
Wang Ying | Xinhua News Agency | Getty Images
For investors looking to take shelter in a trade war, there are pockets of the market that have done well during huge market pullbacks in the past.
The U.S.-China trade war has stocks in free fall with surprise tariffs and currency devaluations.
The S&P 500 has tumbled about 4% since President Donald Trump imposed additional tariffs on China on Thursday. The sell-off deepened on Monday after China retaliated by allowing its currency to drop to 7 against the dollar for the first time since 2008. The S&P 500 had just hit an all-time time of 3,025.86 on July 26 before it all went down.
CNBC used Kensho, a hedge fund analytics tool, to find the best-performing exchange-traded funds when the S&P 500 tumbled at least 10% in one month in the 11-year bull run (leveraged ETFs are excluded from this analysis.) The stock average had undergone four corrections in this record-long bull market. The last time was in December 2018 when the Federal Reserve hiked interest rates.
Bond and gold funds stand out as top performers as a major sell-off in equities would spark a flight-to-safety move. The iShares 20+ Year Treasury Bond ETF managed to gain more than 7% on average during the past pullbacks, while the SPDR Gold Trust climbed more than 5% on average.
Gold is already showing its strength, hitting its highest level since 2013 on Monday.
CNBC also looked at sector performance to see which sectors are relatively safe during a market correction. Utilities have been the best S&P 500 sector when the market is in turmoil. The sector, usually a defensive play, lost 4.3% on average in past corrections.
Consumer staples, also defensive in nature, also held up relatively okay, losing 7.5% on average when the S&P 500 tumbled 10% in one month.
Wall Street analysts are seeing little relief for stocks anytime soon. J.P. Morgan said equity markets could still be in for a few more weeks of pain before an eventual rebound, while Morgan Stanley said a recession will be here in 9 months if the trade war escalates further.