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5 Defensive Stocks to Buy as Trade Tensions Take a New Turn


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China reportedly canceled trade talks with the United States and is unlikely to move ahead until after November's mid-term elections. This has started making investors jittery. The move follows the Trump administration's announcement of imposing tariffs on $200 billion worth of Chinese goods that come to effect on Sep 24. Senior U.S. officials, led by Treasury Secretary Steven Mnuchin had earlier invited China for talks in an attempt to resolve trade disputes, which China had initially welcomed.

Given the increasing bitterness between the United States and China, defensive stocks have grabbed investors' attention. These stocks offer slower but stable growth during periods of uncertainty. Since they also hold the promise of higher-than-average yields, investing in defensive stocks looks like a prudent option at this point.   

China Reportedly Cancels Trade Talks

Reportedly, China has scrapped the planned trade talks with the United States and is unlikely to meet with the Trump administration until after November's midterm elections. China thus won't be sending its vice premier Lu Hi and a mid-level delegation to the United States this week.

The decision to call off the scheduled delegation comes after President Trump signaled that he is prepared for a short-term pain for the U.S. economy by escalating the trade war, as he sees this as long-term gain for China. The United States slapped 10% tariffs on $200 billion worth of Chinese goods last week, which come to effect on Sep 24. China retaliated by announcing 10% tariffs on $60 billion worth of U.S.-made products.

Senior officials, led by Treasury Secretary Steven Mnuchin had invited China for a fresh round of talks in an attempt to resolve the ongoing trade disputes. China initially welcomed the decision and was about to send a delegation to Washington this week. However, with China now declining to move ahead with talks, fears have once again ignited in the minds of investors.

Trade Tensions to Continue

Given that both the United States and China are imposing tit-for-tat tariffs, the trade war is unlikely to end anytime soon. The two countries had earlier slapped tariffs on $50 worth of goods on each other. Fresh tariffs of 10% on $200 billion imposed by the United States billion have been retaliated by China with tariffs on $60 billion worth of U.S.-made goods, which has further aggravated trade tensions. 

Moreover, Trump has threatened that the United States is ready to move ahead with tariffs on another $267 billion worth of Chinese goods. Moreover, the recently imposed 10% tariffs will go up to 25% by the end of the year. Moreover, Trump has indicated that he could impose duties on all Chinese imports, which exceeded $500 billion in 2017.

Defensive Stocks in Focus

Given this scenario, defensive sectors such as real-estate, consumer staples and utilities are likely to gain popularity among investors. These stocks grow at a slower pace than the economy but are more stable in nature and safer during periods of economic uncertainty.

Moreover, they also higher dividend yields than the overall market. Such a characteristic had actually decreased their attractiveness during a year when treasury yields have peaked. However, with trade tensions escalating, dividend stocks may prove to be popular, especially among risk-averse investors.

Our Choices

China's likely calling off the scheduled talks with Washington indicates that trade tensions are likely to persist. There could be several more rounds and delays before both the countries arrive at a solution. However, with Trump determined to impose more tariffs if required, trade tensions are unlikely to be resolved soon.

Investing in defensive stocks, which offer safety and stability during periods of uncertainty looks like a good option at this point. Further, these carry the promise of above-average dividend yields. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.

Archer-Daniels-Midland Company ADM procures, transports, stores, processes, and merchandises agricultural commodities and products.

Archer-Daniels-Midland Company has a Zacks Rank #1 (Strong Buy). The company has expected earnings growth of 41.2% for the current year. The Zacks Consensus Estimate for the current year has improved 9.6% over the last 60 days. The stock has a dividend yield of 2.7%.

Medifast, Inc. MED is a leading manufacturer and distributor of clinically proven healthy living products and programs. It is the brand recommended by more than 20,000 Doctors.

Medifast has expected earnings growth of 96.5% for the current year. The Zacks Consensus Estimate for the current year has improved 23.3% over the last 60 days. The stock has a dividend yield of 0.9%. It has a Zacks Rank #1. You can see  the complete list of today's Zacks #1 Rank stocks here .

Colliers International Group Inc. CIGI  is a service sector providing property and business services to commercial and residential customers in the following areas: residential property management; integrated security systems; consumer services; and, customer support and fulfillment and business process outsourcing.

Colliers International Group has a Zacks Rank #1. The company has expected earnings growth of 20.6% for the current year. The Zacks Consensus Estimate for the current year has improved 3.9% over the last 60 days. The stock has a dividend yield of 0.1%.

Ameren Corporation AEE powers the quality of life for electric customers and natural gas customers through its Ameren Missouri and Ameren Illinois rate-regulated utility subsidiaries.

Ameren has a Zacks Rank #2. The company has expected earnings growth of 14.8% for the current year. The Zacks Consensus Estimate for the current year has improved 6.6% over the last 60 days. The stock has a dividend yield of 2.8%.

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Ameren Corporation (AEE): Free Stock Analysis Report

MEDIFAST INC (MED): Free Stock Analysis Report

Colliers International Group Inc. (CIGI): Free Stock Analysis Report

Archer Daniels Midland Company (ADM): Free Stock Analysis Report

NRG Yield, Inc. (CWEN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: AEE , MED , CIGI , ADM , CWEN



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