The United States seeks to more than double the tariffs on Chinese imports, building pressure on Beijing to enter negotiations. President Trump upped the ante in the trade war to defend national pride and people's interests.
China, in the meanwhile, is ready to retaliate the latest tariff threats, even though representatives of U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He are working behind the scenes to find a solution to the trade crisis.
Nonetheless, the latest flare-up in the trade war doesn't bode well for the stock market and the overall economy. However, companies involved in artificial intelligence, e-commerce, biotechnology and gaming businesses are immune to trade conflicts. They are part of an evolving trend that provides stability during tough times and their quest for the next big thing fuels growth.
Trump Builds Pressure on China With Punitive Trade
The White House has turned up the heat on China, with the Trump administration threatening to double its proposed tariffs on $200 billion worth of Chinese goods. Trump has already asked the U.S. Trade Representative to consider raising the proposed tariffs to 25% from the planned 10%, per Robert Emmet Lighthizer, the current UnitedStates Trade Representative.
Lighthizer said that "we have been very clear about the specific changes China should undertake. Regrettably, instead of changing its harmful behavior, China has illegally retaliated against US workers, farmers, ranchers and businesses." The President had earlier accused the Asian nation for intellectual property theft and slapped 25% tariffs on about $34 billion of Chinese mechanical and technological products.
U.S. officials, by the way, are pretty confident that they have an upper hand over China in this trade tussle because of the recent strength in the domestic economic output and healthy labor market. China, in the meanwhile, is showing signs of economic weakness and is more dependent on trade than the United States.
China Alleges U.S. of Blackmailing
As the Trump administration forces China back to the negotiating table through threats of higher tariffs, the Asian nation warned the United States against "blackmailing and pressuring." China's Ministry of Foreign Affairs vowed to hit back.
Foreign Minister Wang Yi said that "China and the U.S. have had several rounds of consultations and reached important consensus, but regrettably the U.S. did not fulfill its obligations." Spokesman Geng Shuang added that "if the U.S. takes measures to further escalate the situation, we will surely take countermeasures to uphold our legitimate rights and interests."
Trade War Hits Economy
No matter which side says what, a trade war between the two of the most powerful economies in the world increases the threat of a full-blown recession and eventually squeezes corporate profits. Naturally, investors are turning bearish. But, there are certain trends that are reshaping the global economy and are unperturbed by tariff issues. These trends are artificial intelligence, e-commerce, biotechnology and gaming.
And why not? Corporates will continue to deploy artificial intelligence (AI) solutions in order to streamline operations and increase sales. Spending on cognitive and AI systems will hit $19.1 billion this year, an increase of 54.2% over the amount spent last year, according to International Data Corporation estimates.
Money is definitely flowing from brick-and-mortar merchants into online players. After all, the broad e-commerce sales went up 16% last year compared to prior year, the highest growth rate since 2011. But, this trend isn't cyclical; instead it is a global phenomenon. As per research firm eMarketer, Asia-Pacific e-commerce increased 31% last year, while broader retails sales ticked up 7%.
There is always huge demand for life-saving drugs and it has got nothing to do with what is happening in the geopolitical front. And with ageing baby boomers in the United States, demand for such drugs is skyrocketing. Biotech firms, in particular, are researching on the next-generation of life-saving drugs, using modern technology.
Last but not the least, video games have evolved beyond geeks and currently have no age or gender bar. In the United States, an average male video player is 32 years of age, while the average female player is even older, at 36. This is, in fact, the prime age of spending. Moreover, in the United States, two-third of families have a parent who plays video games. On average, $36 billion was spent in gaming in the United States last year alone and more than $108 billion worldwide.
5 Solid Choices
Hence, investing in companies involved in the aforesaid trends seems prudent as of now. We have, thus, selected five such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Microsoft CorporationMSFT develops, licenses, and supports software products, services, and devices. Microsoft, by the way, is expanding into AI functions. Currently, the company has a Zacks Rank #1. The company has an average four-quarter positive earnings surprise of 11.4%. The company's expected earnings growth for the current quarter and year are 14.3% and 9.5%, respectively.
Micron Technology, Inc.MU provides semiconductor systems. AI applications promise to drive huge demand for Micron's memory products like DRAM and NAND flash. The company currently has a Zacks Rank #1. Micron has an average four-quarter positive earnings surprise of 5.9%. The company's expected earnings growth for the current quarter and year are a respective 63.4% and 136.3%.
Amazon.com, Inc.AMZN engages in the retail sale of consumer products and subscriptions. It is currently the largest e-commerce company in the world. The company has a Zacks Rank #1. Amazon has an average four-quarter positive earnings surprise of 1,347.1%. The company's expected earnings growth for the current quarter and year are 534.6% and 272.3%, respectively. You can see the complete list of today's Zacks #1 Rank stocks here.
Illumina, Inc.ILMN provides sequencing and array-based solutions for genetic analysis. The company currently has a Zacks Rank #1. Illumina has an average four-quarter positive earnings surprise of 25.2%. The company's expected earnings growth for the current quarter and year are 7.2% and 22.8%, respectively.
Activision Blizzard, Inc.ATVI develops and distributes content and services on video game consoles. Currently, the company has a Zacks Rank #2. Activision Blizzard has an average four-quarter positive earnings surprise of 27.9%. The company's expected earnings growth for the next quarter and current year are 8.3% and 15.4%, respectively.
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