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Where to Invest to Ride out the Stock Market Volatility

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  • (1:00) - Trump's Tariffs and Impact On The Market
  • (5:30) - 2002 Tariffs: Will Steel Price Surge Again?
  • (9:00) - NAFTA and Inflation Pressure Concerns
  • (15:00) - Where To Invest and What To Stay Away From
  • (22:45) - Are The Large Cap Companies Overheating?
  • (26:10) - Episode Roundup: TCEHY, SINA, TWTR, FB, QABA, UCBI, VALE, MT
  •  Podcast@Zacks.com

Welcome to Episode #122 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

In this episode, Zacks Chief Equity Strategist, and PhD economist, John Blank, joins the discussion on where, if anywhere, investors can hide out during market volatility.

Trade Wars? What’s That?

Suddenly, there are a lot of unknowns, especially on trade. Not only has President Trump announced that he is going to put new tariffs on steel and aluminum, but the EU has already readied a list of retaliation tariffs if the US goes through with the move.

At the same time, there’s also discussion about NAFTA renegotiations, trade talk with the UK, now that they’re leaving the EU their trade deals have to be renegotiated, and there are other surprise events like White House Economic Advisor Gary Cohn resigning.

This has caused volatility to return to the stock market.

Who Could Get Hurt

Retaliation from the EU and Asia could come in the form of tariffs on prized US consumer goods like Harley Davidson motorcycles, food products and popular shoes and clothing.

Other big equipment manufacturers, like Boeing and Caterpillar, could also get hit if their input costs rise.

If you’re feeling nervous, is there anywhere to hide that might be smoother waters?

Stock and ETFs that Might Give Investors the Edge

1.       John likes some of the big materials plays as a contrarian investment like Vale (VALE - Free Report) , a big Brazilian iron ore manufacturer, which ships iron ore to China. It’s cheap, with a forward P/E of just 11 and no one is paying any attention to it right now. It’s a contrarian pick.

2.       Sina (SINA - Free Report) owns Weibo, the Twitter of China. It’s used domestically in China. How will it be impacted by a trade war? It definitely won’t be as severe as someone making a consumer product like an automobile.

3.       Tencent (TCEHY - Free Report) owns WeChat, which is China’s equivalent to Facebook. It has nearly a billion users. Much like Sina, it shouldn’t see huge impacts from a trade war on its business.

4.       Facebook (FB - Free Report) also doesn’t make a product that could see a tariff unless the EU decides to tax Instagram in some way. But that’s unlikely.

5.       Similarly, Twitter (TWTR - Free Report) operates on the Internet as well. It should be able to ride out a trade war.

Tracey also likes the small community banks, which mostly provide services to local customers and businesses through commercial loans and mortgages.

You can buy an ETF with a basket of the community banks in the First Trust NASDAQ Community Bank ETF (QABA).

What other industries and stocks do Tracey and John like, and dislike, if a trade war breaks out?

Tune into this week’s podcast to find out.

[In full disclosure, the author of this article owns shares of TCEHY and FB in her personal portfolio.]

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