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Geopolitical Conflicts Escalate: 5 Top Defensive Stock Picks

Geopolitical conflicts between the United States and several other countries have intensified of late. Prolonged trade conflicts between the United States and China, which commenced in March, are showing no signs of abatement. Moreover, geopolitical conflicts with Iran, Turkey and Russia have only made the situation worse, denting investors' confidence severely.

At this stage, it will be prudent to invest in defensive stocks to keep one's portfolio safe from day-to-day market fluctuations.

US-China Trade War Lingers

The trade war between the United States and China which started in March is showing no signs of subsiding. So far, both countries have imposed tariffs worth $50 billion on each other.

Earlier President Donald Trump has expressed his desire to impose tariffs worth $550 billion on Chinese goods if it continues its unfair trade practices. However, the Chinese government has warned the United States about a "protracted" trade war matching step-by-step if the Trump administration continues to impose tariffs on Chinese goods.

U.S. Reimposes Sanctions on Iran

In May, the United States walked out of the Iran nuclear pact formed in 2015 and announced plans to reimpose oil sanctions on the country. On Aug 7, the Trump administration reintroduced some sanctions on Iran. The remaining measures will be put to effect from Nov 5, 2018.

Notably, the U.S. government has already warned other countries especially the European oil companies, about the possibility of imposition of secondary sanctions on them if they continue to deal with Iran after Nov 4.

US-Russia Conflicts Intensify

On Aug 8, the U.S. government threatened Russia with fresh sanctions by the end of August as retaliation for the alleged poisoning a former British spy and his daughter in the U.K. by a Moscow-sponsored nerve agent. Following the news, the Russian currency ruble depreciated to a two-year low against the U.S. dollar.

On Aug 10, Russian Prime Minister Dmitry Medvedev warned the Trump administration stating that Russia will consider U.S. sanctions as the declaration of an economic war. Meanwhile, Russian Finance Minister Anton Siluanov stated that the country will lower its investment further in the U.S. securities.

Turkey Facing Economic Turmoil

Meanwhile, political diplomacy between the United States and Turkey took a negative turn after Turkey refused to release Andrew Brunson, an American evangelical pastor who was detained in 2016, on charges of trying to overthrow the Erdogan regime. Consequently, President Trump authorized the doubling of metals (steel and aluminum) tariffs on Turkey.

Turkey is also facing severe economic crisis. The country's foreign currency debt is currently pegged at more than 50% of its GDP. Foreign-debt backed economic growth has resulted into 16% inflation in July, well ahead of its central bank's target rate of 5%.

Despite this, President Erdogan ordered the central bank to refrain from rate hike in order to contain inflation. Consequently, Trump's decision of tariff hike depreciated Turkish Lira by 15% against the U.S. dollar.

Our Top Picks

Stock markets are likely to remain volatile in near future due to trade concerns, geopolitical conflicts and may be some sector specific issues. At this stage, investment in defensive sectors such as utilities, telecom service providers and equipment makers will be fruitful.

We have narrowed down our search on five stocks with either a Zacks Rank #1 (Strong Buy) and strong growth potential. You can see the complete list of today's Zacks #1 Rank stocks here .

The chart below depicts price performance of our five picks in the last six months.

NRG Energy Inc.NRG is the leading integrated power company in the United States with a diversified competitive electric generation portfolio and a leading retail electricity platform. The company has expected earnings growth of 279.8% for current year. The Zacks Consensus Estimate for the current year has improved by 16.6% over the last 30 days.

Atlantic Power Corp.AT is an independent electric power producer with a diversified portfolio of independent, non-utility power generation projects and one transmission line situated in major U.S. markets. The company has expected earnings growth of 69% for current year. The Zacks Consensus Estimate for the current year has improved by 55% over the last 30 days.

United States Cellular Corp.USM is the eighth largest wireless company in the United States, based on the aggregate number of customers in its consolidated markets. The company has expected earnings growth of 91.4% for current year. The Zacks Consensus Estimate for the current year has improved by 60.9% over the last 30 days.

AT&T Inc.T provides communication, entertainment and internet services to consumers and businesses globally. In the United States, the company is the largest pay-TV provider and owns the second largest wireless network. The company has expected earnings growth of 15.7% for current year. The Zacks Consensus Estimate for the current year has improved by 3.8% over the last 30 days.

Turtle Beach Corp.HEAR is a leading audio technology company designing audio products for consumer, commercial and healthcare markets. The company has expected earnings growth of 1,004.2% for current year. The Zacks Consensus Estimate for the current year has improved by 114.9% over the last 30 days.

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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.


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

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