The SCHD ETF has retreated in the past few weeks as American equities dived. The Schwab US Dividend Equity ETF has dropped to a low of $27.45, down by almost 7% from its highest level this year. It has, nonetheless, done better than popular indices like the S&P 500, Nasdaq 100, and the Dow Jones.
Wall Street slashes S&P 500 forecast
The SCHD ETF retreated after major Wall Street players slashed the S&P 500 forecasts for the year citing the ongoing tariffs and uncertainties in the US.
Goldman Sachs, the premier Wall Street bank, lowered its estimate for the S&P 500 index from $6,500 to $6,200. The bank noted that the downgrade reflected a 4% drop in the fair-valued P/E multiple from 20.6x to 21.5x.
Goldman Sachs joins other big players who have downgraded the target. Citi analysts lowered the estimate and recommended that investors should focus on Europe, where major indices like the German DAX, French CAC 40, and Spanish IBEX 35 are hovering near their all-time highs.
HSBC, on the other hand, has recommended investors should rotate from the US and move to China. They noted that Beijing was now keen on supporting local businesses gain market share and be more productive to boost economic growth.
More Wall Street banks could decide to slash their S&P 500 index forecasts this year. The most bullsh analysts are from Oppenheimer who expects the index to rise to $7,100. They are followed by analysts from other banks like Wells Fargo, Deutsche Bank, Yardeni, Evercore ISI, and BMO Capital Markets, who all expect the index to jump to over $6,800.
Read more: SCHD ETF stock faces headwinds and tailwinds: is it a buy?
SCHD ETF is less exposed to tariffs
The SCHD ETF will likely do better than the S&P 500 and Nasdaq 100 indices if the ongoing trade war continues. That’s because its top companies are less exposed to these tariffs.
The biggest component in the SCHD ETF is in the financials segment, which accounts for a 18.7% share of the fund. Most of the financial services companies in the fund operate in the US and have little exposure globally. As such, financial companies will likely not be impacted by these tariffs.
The second-biggest category is health care, which includes companies like Abbvie, Amgen, Bristol Myers Squibb, and Pfizer. Trump has warned that he will apply tariffs to companies in the pharmaceutical industry. However, these firms will be little affected because they rely on Medicare and Medicaid insurance payments.
Therefore, while other categories like industrials and consumer staples will be exposed to these tariffs, odds are high that their weakness will be offset by energy, healthcare, and financials.
SCHD ETF stock analysis
The daily chart shows that the Schwab US Dividend Equity ETF formed a double-top pattern around the $29 resistance level. This is one of the most bearish patterns in the market. The stock has also moved slightly below the lower side of the ascending channel.
Therefore, like most US equity ETFs, there is a likelihood that it will have some volatility, and possibly retest the 100-day moving average at $25.7. A move above the resistance at $29 will invalidate the bearish view.
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