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Tariff Clash Haunts Wall Street: 5 Ultra-Safe Picks

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Equities over the past few sessions gained traction mostly on the back of strong corporate results. But, fresh round of tariff clashes between the Trump administration and China is now making things difficult for the stock market. After all, such tit-for-tat tariffs on each other’s imports will certainly affect corporate profits and the overall economy.

With the markets gyrating after a strong run, investing in stocks that provide excellent risk-adjusted returns seems judicious.

Trump Moves Forward With Tariffs

The US Treasury Department Robert Lighthizer recently announced that the Trump administration will levy 25% tariffs on $16 billion worth of Chinese goods starting Aug 23. The new set of measures will target around 280 products, including electronic, plastic and chemical products, as well as motorcycles and railway cars.

The President had earlier accused the Asian nation for intellectual property theft and slapped 25% tariffs on about $34 billion of Chinese mechanical and technological products such as tractors, plastic tubes, and measurement equipment like speedometers.

Lighthizer himself said that “we have been very clear about the specific changes China should undertake. Regrettably, instead of changing its harmful behavior, China has illegally retaliated against US workers, farmers, ranchers and businesses.”

The White House, in fact, had previously asked the Office of the United States Trade Representative about the possibility of charging a 10% tariff on $200 billion worth of Chinese goods.

China Plans Tariffs on US Products

The Chinese State Council, nonetheless, warned the United States that “any unilateral threat or blackmail will only lead to intensification of conflicts and damage to the interests of all parties.”

China said that it would impose tariffs on $60 billion of U.S. goods. The Asian nation, in fact, decided to impose duties of 25%, 20%, 10% and 5% on U.S. products provided the Trump administration follows through on threats to tax $200 billion of Chinese goods.

China has already listed 5,207 products that it would target in an effort to “safeguard its own legitimate interests” stated the Chinese State Council Tariff Commission. These products primarily include meat, coffee, nuts, alcoholic drinks, minerals, chemicals, leather products, wood products, machinery, furniture and auto parts.

Trade War Hits Economy: Grab 5 Ultra-Safe Stocks Now

No matter which side says what, a trade war between the two of the most powerful economies in the world increase the threat of widespread recession and eventually squeeze corporate profits. Naturally, investors remain cautious.  In such a scenario, investors 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).

Apollo Commercial Real Estate Finance, Inc. (ARI - Free Report) operates as a real estate investment trust (REIT). The stock currently has a Zacks Rank 2 and a beta of 0.54. The company has a dividend yield of 9.8%, while its five-year average dividend yield is 10.3%.

Apollo Commercial Real Estate Finance’s expected earnings growth for the current year is 27.9%, in contrast to the REIT and Equity Trust industry’s projected decline of 0.5%. In the last 60 days, three earnings estimates moved north, while one moved south for the current year. The Zacks Consensus Estimate for earnings rose 1.6% in the same period.

Alliance Resource Partners, L.P. (ARLP - Free Report) produces and markets coal primarily to utilities and industrial users in the United States. The stock currently has a Zacks Rank 1 and a beta of 0.76. The company has a dividend yield of 10.5%, while its five-year average dividend yield is 9.4%.

Alliance Resource Partners’ expected earnings growth for the current year is 14.9%, more than the Coal industry’s rally of 4.6%. In the last 60 days, three earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 5.8% in the same period.

JMP Group LLC (JMP - Free Report) provides investment banking, sales and trading, equity research, and asset management products and services in the United States. 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%.

JMP Group’s expected earnings growth for the current year is 70%, higher than the Financial - Investment Bank industry’s gain of 38.6%. In the last 60 days, one earnings estimate moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings soared 54.5% in the same period. You can see the complete list of today’s Zacks #1 Rank stocks here.

Oxford Square Capital Corp. (OXSQ - Free Report) is a business development company. The stock currently has a Zacks Rank 2 and a beta of 0.64. The company has a dividend yield of 6.5%, while its five-year average dividend yield is 5.3%.

Oxford Square Capital’s expected earnings growth for the current year is 13.3%, more than the Financial - SBIC & Commercial Industry industry’s rally of 1.3%. In the last 60 days, one earnings estimate moved up, while none moved down for the current year. The Zacks Consensus Estimate for earnings increased 1.5% in the same period.

AT&T Inc. (T - Free Report) provides communications and digital entertainment services. The stock currently has a Zacks Rank 1 and a beta of 0.43. The company has a dividend yield of 6.2%, while its five-year average dividend yield is 5.3%.

AT&T’s expected earnings growth for the current year is 15.7%, higher than the Wireless National industry’s rally of 13.8%. In the last 60 days, 13 earnings estimate moved north, while one moved south for the current year. The Zacks Consensus Estimate for earnings advanced 3.5% in the same period.

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