5 Consumer Stocks To Yield Returns Despite US-China Tensions
Zacks Investment Research | Apr 02, 2018 09:57PM ET
Escalating trade tensions between the world’s largest economies, United States and China, are likely to cast a shadow on economies. Also, the disturbing recollection of the stock market crash of 1929, which was followed by the Great Depression, hounds investors.
After U.S. President Trump announced plans to impose tariffs on up to $60 billion of annual Chinese imports, China retaliated by revealing plans to levy tariffs on 128 U.S. products. This has given rise to fears of an all-out trade war between the countries.
How Will U.S.-China Clash Hurt Consumers?
The present U.S. market scenario shows increased consumer demand for goods and services. According to the Fed’s latest forecast, the economy is anticipated to grow at a reasonable rate of 2.7% in 2018. Unemployment is predicted at 3.8% for 2018 against the current 4.1%. Moreover, high real disposable income and low inflation are resulting in the favorable purchasing behavior. The fourth quarter of 2017 saw the highest consumer spending after three years, offsetting the impact of a surge in imports.
A trade war can therefore alter the rosy scenario as American consumers will now have to face a dearth of China-imported products. Tariff on Chinese imports will unquestionably bump up prices, directly affecting consumers and their discretionary spending.
Cyclical Sectors at Risk
Cyclical sectors are likely to suffer a great deal if a trade war rages on as these are sensitive to the business cycle. Any economic crisis inevitably results in lower discretionary income. This is because higher prices compel consumers to prioritize spending.
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