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Stay Safe as Trade War Escalates: 5 Top Defensive Stocks

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The ongoing trade conflict between United States and China is showing no signs of abating. The issue has escalated to a point where imposition of tariffs and retaliatory tariffs may go up to $550 billion on either side. From Jul 6, the first phase of these tariffs with a total worth of $34 billion will be implemented.

Since March 2018, U.S. stock markets have been facing severe volatility primarily due to imposition of various tariffs by the U.S. government and related trade conflict. The situation is likely to aggravate in the near-term as the U.S. deadline to impose first phase of tariffs on China ends today. At this stage, it will be prudent to invest in defensive stocks to keep one’s portfolio safe from day-to-day market fluctuations.  

The US-China Trade War Intensifies

On March 2018, the United States had decided to levy 25% tariffs worth of $50 billion on China. Nearly 1,300 Chinese products which are utilized in high-tech sectors like industrial robots, information technology, communication technology, aerospace and medicine bore the brunt of the tariffs.

The rest of tariffs worth $16 billion will be implemented within next two weeks. China has also retaliated by imposing tariffs worth of $50 billion primarily on U.S. agricultural exports. Meanwhile, two rounds of meetings between high-level delegations of both governments took place in May. However, no proper resolution was reached.

Notably, on Jul 5, President Trump stated that his administration would consider imposing additional tariffs worth $500 billion on Chinese goods, should Beijing retaliate. Additionally, the U.S. government barred Chinese telecom behemoth China Mobile to enter the U.S. market.

Tariffs Imposed on Other Countries

Sine Jun 1, the U.S. government has imposed 25% tariff on steel and 10% on aluminum from the imports of Canada, Mexico and the European Union (EU). President Trump levied these tariffs on March 1 for the first time. Notably, these countries have been close political allies of the U.S. government for a long time.

As a result of these trade conflicts, U.S. exports have become vulnerable to retaliatory tariffs.  Almost all countries of the EU along with Canada and Mexico have either retaliated or have decided to retaliate against the United States.

Our Top Picks

Stock markets are likely to remain volatile in near future due to trade concerns, geopolitical conflicts and may be some sector specific issues. At this stage, investment in defensive sectors such as utilities and consumer staples will be fruitful.

We have narrowed down our search on five stocks with Zacks Rank #2 (Buy) and strong growth potential. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

The chart below shows price performance of our five picks in the last three months.

 

Global Water Resources Inc. (GWRS - Free Report) is a water resource management company. It owns and operates regulated water, wastewater and recycled water utilities. The company has expected earnings growth of 41.7% for current year. The Zacks Consensus Estimate for the current year has improved by 21.4% over the last 60 days.

Brookfield Renewable Partners L.P. owns and operates renewable power platform. Its power generating portfolio comprised of hydroelectric generating, wind facilities and natural gas-fired plants. The company has expected earnings growth of 222.2% for current year. The Zacks Consensus Estimate for the current year has improved by 57.1% over the last 60 days.

Ollie's Bargain Outlet Holdings Inc. (OLLI - Free Report) is a leading retailer of closeouts, excess inventory and salvage merchandise. The company has expected earnings growth of 36.8% for current year. The Zacks Consensus Estimate for the current year has improved by 1.8% over the last 60 days.

Chesapeake Utilities Corp. (CPK - Free Report) is engaged in natural gas distribution and transmission, propane distribution and marketing and advanced information services. The company has expected earnings growth of 20.8% for current year. The Zacks Consensus Estimate for the current year has improved by 1.5% over the last 60 days.

ONEOK Inc. (OKE - Free Report) is a diversified utility company involved in gas production, natural gas processing, gathering, storage and transmission in the mid-continent region of the United States. The company has expected earnings growth of 49.3% for current year. The Zacks Consensus Estimate for the current year has improved by 1.9% over the last 60 days.

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