The United States fired its next shot in China trade war. President Trump’s administration is preparing another gargantuan round of tariffs on Chinese imports, which would perhaps be a concrete move toward a full-fledged trade war with China.
Intensifying trade tensions between the United States and China may also force the equity market to take a dive after years of growth, while corporates are fretting over the risks a trade war will pose to their profits.
With the markets witnessing a healthy pullback after a strong run, investing in stocks that provide excellent risk-adjusted returns seems judicious.
Trump Prepares Additional Tariffs on $200B Chinese Goods
The White House unveils another round of tariffs on Chinese products worth $200 billion, thus, escalating the U.S.-China trade war. A slew of additional commodities could face 10% tariffs, as per Trade Representative Robert Lighthizer. The items include fruit and vegetables, handbags, refrigerators, rain jackets and baseball gloves, to name a few.
Trump had earlier directed Robert Lighthizer to identify $200 billion Chinese goods on which tariffs can be imposed. This is United States attack on the Asian nation for intellectual property theft. However, Trump did mention that “China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology.” He added that “rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong.”
U.S. Wages the “Biggest Trade War in Economic History”
The Trump administration has already levied 25% tariffs on Chinese goods worth $34 billion. This will affect more than 800 Chinese items, including industrial machinery, medical devices and auto parts. The United States is also working on levying tariffs on Chinese goods worth another $16 billion. The tariff announcement of $200 billion would be the third round.
Beijing responded by slapping $34 billion of U.S. imports. The Chinese government said that would hit 500 U.S. export products, including cars and major agricultural goods such as soybeans and meat. China’s Commerce Ministry said that “China is forced to strike back to safeguard core national interests and the interests of its people. It accused the United States of “typical trade bullying”.
Will the Trade War Result in a U.S. Recession?
Bank of America Merrill Lynch U.S. economist Michelle Meyer cautioned that a “major global trade confrontation would likely push the U.S. and the rest of the world to the brink of a recession.” Corporates will be hit with higher costs due to the imposition of tariffs. Such companies will, then, find it difficult to get the required materials. Subsequently, confidence among business houses will tank, forcing them to drastically reduce spending.
Bank of England governor Mark Carney also added that U.S. economic growth could be hit by as much as 5% in the event of a trade war, while the world economy will face just over 1%. And why not? The world’s largest economy would be affected the most as it is embroiled in trade wars on multiple fronts, including its disagreements with Canada, Mexico and the European Union.
China Isn’t Spared
Trump’s latest shot in the trade war hasn’t spared China either. The nation’s financial market, now, is one of the worst performers in the world, weighed down by tit-for-tat tariffs and its adverse effects on the global economy.
The Shanghai Index has officially entered the bear market in June. This means that it has plunged more than 20% from the recent peak. Chinese stocks having significant exposure to the U.S. market were affected the most. Notable among them is major household appliances maker Qingdao Haier, whose shares dropped more than 3% in the last trading session.
VIDEO 5 of the Best Ultra-Safe Stocks to Buy Now
As prospects of a fresh trade war loom large, it seems Wall Street will most likely face a bloodbath. Investors, thus, should build a strategy on low-risk assets and a combination of parameters that leads to better returns. The best way to go about doing this is by creating a portfolio of low-beta stocks, which are inherently less volatile than the markets they trade in. In this case, a low beta ranges from 0 to 1.
These stocks are also dividend payers and are domestic producers of goods. Dividend paying stocks boast immense financial strength and are immune to market vagaries. Such stocks reflect solid financial structure, healthy underlying fundamentals and better quality business. To top it, due to their limited international exposure, they offer higher protection than their large- and mid-cap counterparts against any economic upheaval.
We have, thus, selected five stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
BRT Apartments Corp. BRT is a real estate investment trust that owns, operates and develops multi-family properties. The stock currently has a Zacks Rank 1 and a beta of 0.43. The company has a dividend yield of 5.9%, while its five-year average dividend yield is 1.1%.
BRT Apartments’ expected earnings growth for the current year is a solid 58.2%. In the last 60 days, one earnings estimate moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 15.2% in the same period.
Computer Programs and Systems, Inc. CPSI provides healthcare information technology solutions and services in the United States. The stock currently has a Zacks Rank 1 and a beta of 0.1. The company has a dividend yield of 1.2%, while its five-year average dividend yield is 3.9%.
Computer Programs and Systems’ expected earnings growth for the current year is a superb 31.1%. In the last 60 days, 4 earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings increased 4% in the same period.
Community Trust Bancorp, Inc. CTBI operates as the bank holding company for Community Trust Bank, Inc. that provides commercial and personal banking services to small and mid-sized communities. The stock currently has a Zacks Rank 2 and a beta of 0.7. The company has a dividend yield of 2.5%, while its five-year average dividend yield is 3.2%.
Community Trust Bancorp’s expected earnings growth for the current year is an encouraging 22.5%. In the last 60 days, one earnings estimate moved up, while none moved down for the current year. The Zacks Consensus Estimate for earnings advanced 1.8% in the same period. You can see
. the complete list of today’s Zacks #1 Rank stocks here Gladstone Commercial Corporation GOOD is a real estate investment trust focused on acquiring, owning, and operating net leased industrial and office properties across the United States. The stock currently has a Zacks Rank 2 and a beta of 0.78. The company has a dividend yield of 7.6%, while its five-year average dividend yield is 8.4%.
Gladstone Commercial’s expected earnings growth for the current year is 4.6%. In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 0.6% in the same period.
Shoe Carnival, Inc. operates as a family footwear retailer in the United States. The stock currently has a Zacks Rank 1 and a beta of 0.85. The company has a dividend yield of 0.1%, while its five-year average dividend yield is 1.1%.
Shoe Carnival’s expected earnings growth for the current year is a promising 36.2%. In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings jumped 5.7% in the same period.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>