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4 Utility Stocks to Buy as US-China Trade War Escalates

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The trade war between the United States and China just got worse, with President Trump unveiling a fresh round of tariffs on imports from China. While China has responded that it would impose retaliatory tariffs, it did not divulge details about its plan of action.

Renewed fears of a trade war may result in a scurry toward safe-haven sectors as preferred investments. One of the most-popular, safe-haven sectors is utilities. This sector comprises companies that provide telephone, gas, water and electricity services.

The Utilities Select Sector SPDR exchange-traded fund has gained over 8% in the past month against the S&P 500’s decline of 0.3%. Under such circumstances, investing in companies from the utility sector seems prudent.

U.S. Blasts China With Additional Import Tariffs

On Jul 10, the Trump administration unveiled a spate of fresh tariffs on imports from China. Trade Representative Robert Lighthizer stated that Chinese commodities worth $200 billion such as fruits and vegetables, handbags, refrigerators, rain jackets and baseball gloves among others could be charged with 10% tariffs.

The newly proposed tariffs would undergo a two-month review post which a decision on its future would be taken. Trump reasoned that he is wary of China’s unfair trade practice and the country’s tendency to steal intellectual property from the United States.

China Promises to Hit Back at Trump’s Tariffs

On Jul 11, Beijing announced that it planned to retaliate against Trump’s most recent tariffs. However, the country did not reveal any details about how it would hit back at White House’s fresh round of duties. This has resulted in approximately $250 billion worth of Chinese goods being subject to import tariffs from the United States.

The country’s commerce ministry termed such an act by the United States as "totally unacceptable" heightening of the already existing trade dispute between the two countries. Further, the ministry pledged to safeguard the country’s "core interests." Finally, the Chinese ministry also vowed to impose “necessary countermeasures” on the United States if the need be.

4 Best Choices

The trade-war between the United States and China shows no signs of ebbing any sooner. This has got more to do with Trump’s new tariffs on additional goods worth $200 billion from China. Although China has not retaliated with a tit-for-tat tariff, it is not expected to back off.

Under circumstances where geopolitical conditions remain unfavorable, investing in safe-haven stocks such as utilities would be advisable. In this context, we have selected four stocks that are expected to gain from these factors. These five stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Algonquin Power & Utilities Corp. (AQN - Free Report) is the owner and operator of regulated as well as non-regulated generation and distribution utility assets in Canada and the United States.

The company is based out of Oakville, Canada and sports a Zacks Rank #1. The expected earnings growth rate for the current year is 13.79%. The Zacks Consensus Estimate for the current year has improved 8.2% over the last 60 days.

CMS Energy Corporation (CMS - Free Report) engages in generation, distribution and transmission of electricity as well as natural gas.

The company is based out of Jackson, MI and carries a Zacks Rank #2. The expected earnings growth rate for the current year is 7.53%. The Zacks Consensus Estimate for the current year has improved 5.8% over the last 60 days.

Ameren Corporation (AEE - Free Report) engages in rate-regulated generation, transmission as well as distribution of electricity.

The company is based out of St. Louis, MO and has a Zacks Rank #2. The expected earnings growth rate for the current year is 7.49%. The Zacks Consensus Estimate for the current year has improved 8.5% over the last 60 days.

Brookfield Renewable Partners L.P. is the owner and operator of renewable power generating facilities across the globe.

The Zacks Rank #2 company is based out of Hamilton, Bermuda. The expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved 57.1% over the last 60 days.

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Ameren Corporation (AEE) - free report >>

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Algonquin Power & Utilities Corp. (AQN) - free report >>

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