5 Stocks To Buy As Markets Are Shrugging Off Trade War Fears

The tit-for-tat tariff threats have become real with the two largest economies in the world entering into a trade war on Jul 6. The United States and China slapped tit-for-tat duties on each other’s $34 billion of exports after months of rhetorical tariff threats, with Beijing accusing Washington of triggering the "largest-scale trade war."

Though investors shrugged off this initial round of trade war, the worst is yet to come. Tariffs on another $16 billion worth of Chinese goods is expected to go into effect in two weeks. And if Beijing retaliates, Trump has threatened additional tariffs on $500 billion in Chinese goods. These events could result in a global recession, hurting global supply chains, increasing costs for businesses and consumers, and slowing down investments.

However, the markets emerged unscathed since the start of the trade war on Friday and showed its resiliency on strong economic fundamentals. A number of prominent Wall Street strategists remained bullish about the outlook for American equities given the expectations of double-digit earnings growth, accelerated buybacks, pro-business policies, historic tax cuts, and a strong labor market.

Solid Trends

The confidence in economy has only increase, following a robust June jobs data on the day that Trump finally levied tariffs on Chinese goods. This is especially true as the United States added more-than-expected 213,000 jobs last month, representing the 93rd straight month of additions and the longest recorded streak. With this, America is being considered as being near full employment. Though the unemployment rate rose slightly to 4% from 3.8% as a higher number of workers are looking for work and not all of them have found one, wages grew at a relatively solid annual clip of 2.7%.

With solid job gains, the nine-year-old economic expansion, which is considered the second-largest-ever, remains on solid ground. The momentum in the manufacturing sector continues to pick up with American factory activity acceleration for the second straight month in June. Several economists expect economic growth to accelerate to an annual pace of 4% during Q2, double the growth of 1Q.

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Gary Anderson 1 year ago Contributor's comment

I wonder how much of the trade deficit shrinkage can be attributed to getting ahead of the tariffs? Could be a trap.