The trade war has far reaching consequences. One way to think about it, as bleak as it sounds, is that there is no winner whatsoever. However, there are sectors, ETFs, and stocks that will likely lose more than others. The technology, materials, and industrial sectors stand to lose the most in a prolonged trade war as they have the largest proportion of manufacturing in China and the highest proportion of Chinese customers. Boeing and Ingersoll-Rand, for instance, are both very exposed to China. However, the greatest pain is likely to be felt by technology companies in the iShares PHLX Semiconductor ETF like Qualcomm, Micron Technology, Broadcom, and Texas Instruments.
FINSUM: Basically anyone making or selling a large amount of products in China is in trouble. We also wonder about how increased tariffs would flow through to retailers who source a high percentage of their products in China (e.g. Walmart, Target etc.).
The trade war seems to be back on with full force. Trump spooked markets today by warning that he may impose higher tariffs on China. With that in mind, here are the stocks and sectors most at risk of big selloffs. Industrials and technology shares are the most vulnerable to tariff worries. It is difficult to say what stocks will be most affected because the potential impacts are widespread. However, the following list looks very at-risk: Colfax, Danaher, Emerson Electric, Fortive, Gates Industrial, 3M, and Kennametal.
FINSUM: We are very early in the volatility for this round of trade fears. Hopefully this minor panic will be the extent of it.
Markets and the global economy got some very welcome news this weekend. On the sidelines of the G-20 conference, President Trump and Chinese leader Xi came to a “truce” in their trade war spat this weekend after what they both called a “high successful meeting”. Accordingly, several industry-specific stocks should react well to the news. These stocks are: Stanley Black & Decker, Caterpillar, Emerson Electric, AGCO Corporation, and 3M.
FINSUM: Many of these stocks already have big tariff-driven headwinds in their 2019 outlooks, so the possibility for big reversals seems likely. A lot of gloom had already set in, which means there is significant upside.
With the midterms finally over, investors need to think critically about how the market will respond. In particular, specific sectors will have different reactions. With that in mind here are six sectors to watch. Drugmakers seem likely to be seen favorably as the split between the parties means new regulation governing prices seems less likely. Banks could go either way, but most expect Trump’s deregulatory agenda to continue. Technology is looking less favorable as regulation and scrutiny of the sector is one of the few areas of bipartisan agreement. Industrials are looking less favorable as well, as the odds of a big infrastructure package have decreased. Energy seems neutral, as no big changes appear likely. Finally, marijuana stocks are likely to jump.
FINSUM: There is going to be quite a range of reactions over the next few months as each sector digests how the newly split Congress will affect them.
Okay, there is a trade war going on. But even still, industrial stocks look too cheap, at least according to Barron’s. The Industrial Select SPDR is up less than 2% this year, way behind the broader market because of fears the sector will get hammered by a trade war. Compounding that is the worry that the sector is past the peak of its cycle. However, the sector is still posting strong growth and good earnings. Stocks like Boeing and Caterpillar had big gains last year, but have weakened considerably recently. Recent earnings, though, were good, showing that core machinery sales continued the 15% annual growth they have been showing for several quarters. In seems the worst could be behind the sector.
FINSUM: It is too early to say whether the sector is out of the woods, but we would say that a 2% gain this year is not exactly what we would think of as the pre-condition for calling something very cheap.