The growing trade war between the United States and China has sent yielding sectors as tools higher But investors don't have to get all defensive yet, according to strategists who say there are many growth stocks with some isolation from China.
Some investors seek security in domestic US growth stocks from software and online advertising to aviation and recruitment since President Donald Trump's May 5 tweets showed that US talks with China were in trouble.
While the prospect of a longer trade war has shaken the market, investors are also trying to protect themselves against the risk that they might miss out on gains in the event that the US and China come to a surprise agreement.
Due to the difficulty of chances for a deal between the United States and China, John Praveen Portfolio Manager at QMA in Newark, New Jersey, said he would not "completely sell out" of shares. But he said, "If I was 5 percent overweight shares, I can reduce it to 3 percent and see if I could reduce exposure to semiconductors and technology."
"If you want to avoid the sheer payout game and avoid China's trading story, look at stocks that are a pure game on the US economy," says Peter Kenny, founder, Kenny & # 39; s Commentary LLC in New York. 1[ads1]9659003] Broadly speaking, investors have increased their defenses, while S & P has fallen about 4 percent since Trump announced its plan to raise tariffs on Chinese goods at the beginning of May, the tools – a low-growth sector with reliable high dividends – have risen more than 2 percent.
But growth hungry investors are looking for more fresh companies with little exposure to foreign sales or Chinese imports, even in the dilapidated technology sector, where semiconductor stocks have led to the recent downturns.
Online advertising platforms and cloud software are two technology segments that will not be directly affected With China tariffs, according to Daniel Morgan, portfolio manager at Synovus Trust in Atlanta.
In online advertising favor Morgan Twitter, Facebook and Snap Inc over Google's parenting letter, which suspended the business of China's Huawei this week as a result of a trade battle.
He also enjoys software vendors such as Salesforce.com, which reaches 70 percent of America's revenue and only 10 percent f rom the Asia-Pacific. However, Salesforce.com has dropped more than 5 percent since Trump Tweets.
Another option is Workday Inc, which has risen about 4 percent since May 5, and accounts for 75 percent of US revenue.
Steve Lipper, senior investment strategist at Royce & Associates, favors US companies offering recruitment and merger advice services due to a strong US labor market and solid merger.
However, while US-hiring recruitment firms such as Kforce and ASGN Inc cannot be harmed directly by the commercial war, Robert W. Baird's analyst Mark Marcon notes that they would suffer if the tariffs led to the economy weakening.
Instead, Marcon favors domestic payroll software companies such as Automatic Data Processing Inc and Paychex Inc, which tend to do better than recruiters in a downturn. But even though their fundamentals remain strong, payroll companies like Paycom and Paylocity may be vulnerable in a selloff because of relatively high valuations, Marcon said.
In Industry – A High Exposure Sector to China – Burns McKinney, portfolio manager Allianz Global Investors in Dallas enjoys the defense stocks such as Raytheon and Lockheed Martin, which may be beneficial if US hostilities continue to intensify.
Since sectors such as tools have risen so much, Royce's Lipper favors less obvious secure choices.
"Be careful when the consensus view is already reflected in valuations," said Lipper, but he added, "The US economy is so diverse that there are always areas that are isolated from what you are concerned about."