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5 Safe Stocks to Counter IMF's Dull Global Economic Outlook

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The International Monetary Fund (IMF) has shown pessimism on World Economic Outlook (WEO), downgrading the global growth rate and warning policymakers to watch their step before taking any decision.

On the other end, the world’s economic giants, the United States and China are paying the price for the long-lasting trade war. China’s GDP, in particular, declined to the lowest level in last three decades, while manufacturing sectors in both the United States and China slowed down.

Investors should thus purchase safer defensive stocks to keep their portfolio guarded in such an economic upheaval.

IMF’s World Economic Outlook Shaves Growth

Per an Oct 15 report, IMF expects global growth to be 3% in 2019, lower than last year’s growth of 3.6%. It is a 0.3% cut from its April’s forecast. IMF’s chief economist, Gita Gopinath focused on higher import tariffs that are impacting manufacturing activities and international trade.

In fact, IMF warned the world’s central banks that they are “wasting scarce ammunition” as an attempt to compensate for “policy blunders” leaving global economy at its weakest since the last recession. If world economic growth slows to below the 2.5% rate, it would indicate a recession.

The forecast for 2020 was also reduced from 3.6% to 3.4%. IMF also mentioned that if the U.S.-China trade war continues, global growth will reduce another 0.8% by 2020.

The persistent trade war, by the way, has already impacted China’s economic growth. And now a downward revision for growth has also been made for the Singapore, Hong Kong and South Korea.

China’s Growth Slows Down at 6% Rate

China’s economic growth slowed down at a 6% rate in the third quarter, its lowest since 1992 as a result of deteriorating business activities. Though this quarter reported recovery in sectors like industrial output and retail, there was only a 5.4% rise in investment in fixed assets, a major economic driver. 

In spite of China’s immense efforts to support the economy, by cutting taxes, the country is struggling to overcome the impacts of the trade war with the United States and a poor domestic demand. With the “phase one” deal still remaining unsigned and fresh trouble emerging from Hong Kong, it is unsure if conditions will improve any time soon.

Weak U.S. Economic Data Triggers Tension

On the other side of the Pacific, economic data reported in the first half of October is leading to signs of a slowdown and creating panic among investors. U.S. retail sales fell 0.3% in September, as per government reports. Consumers have been the strength of the U.S. economy but this first-time drop in retail sales in seven months clearly indicates that trade war fears are restraining them from spending.

Further, September’s Institute for Supply Management’s (ISM) manufacturing index slipped to 47.8 — its lowest level since June 2009. The decline in manufacturing activities has been strongly impacted by sluggish exports and disruption in supply chain, thanks to the U.S-China trade war.

All these factors point toward a slowdown in the U.S. economy as well.

5 Stocks to Buy

Markets are turning volatile due to the aforesaid factors. So, defensive stocks that have give a stable performance in any market gyration are investors’ best hope to guard their portfolio now.

Stocks like utilities, consumer staples and healthcare are considered defensive as they have stable earnings regardless of market condition, the fact that these products or services are of basic necessity, keeps them in consistent demand irrespective of the business.

We have thus shortlisted five such defensive stocks that flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MDU Resources Group, Inc. (MDU - Free Report) is a publicly traded natural gas distribution company, transporting and distributing energy throughout the United States. The company’s expected earnings growth rate for the current year is 8.7%, above the industry’s projected rally of 2.2%.

The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the past 60 days. MDU Resources Group’s shares have gained 16% on a year-to-date basis.

AquaVenture Holdings Limited (WAAS - Free Report) is a publicly traded company that offers clean drinking and process water. The company’s expected earnings growth rate for the next quarter is 32%, in contrast to the industry’s decline of 12%.

The Zacks Consensus Estimate for current-year earnings has improved 14.5% over the past 90 days. AquaVenture Holdings’ shares are up 2.5% on a year-to-date basis.

Tenet Healthcare Corporation (THC - Free Report) is a publicly traded company that owns and operates general hospitals and related health care facilities for urban and rural communities across the United States. The company’s expected earnings growth rate for the current year is 29%, in contrast to the industry’s decline of 1.1%.

The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the past 90 days. Tenet Healthcare’s shares have risen 38.9% on a year-to-date basis.

US Foods Holding Corp. (USFD - Free Report) is a publicly traded foodservice distributor, delivering food to independent and multi-unit restaurants, healthcare and hospitality entities, government and educational institutions across the United States.The company’s expected earnings growth rate for the current year is 12.3%, above the industry’s projected rally of 4.5%.

The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the past 60 days. US Foods’ shares are up 25.3% on a year-to-date basis.

Genesis Healthcare, Inc. (GEN - Free Report) is a publicly traded long-term care, assisted or senior living and rehabilitation therapy provider in the United States. The company’s expected earnings growth rate for the current quarter is 68.8%, above the industry’s projected rally of 39.3%.

The Zacks Consensus Estimate for current-year earnings has improved 35.2% over the past 60 days. Genesis Healthcare’s shares have gained 28.8% on a year-to-date basis.

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