5 Stocks That Survived May's Market Mayhem

Markets just suffered their worst May in nearly a decade. And last month’s losses can be singularly attributed to the U.S.-China trade war. Negotiations between the two countries remained inconclusive and hopes of a near-term deal have more or less evaporated at this point.

In fact, Trump stepped up his actions against China by raising tariffs last month, a move that disappointed market watchers. Indications that this protracted trade war is hurting the global economy are already evident.

If this wasn’t enough, Trump ended the month with a surprise announcement, threatening to slap tariffs on all Mexican imports. This aggravated losses for equity markets, which closed the month on a sour note. However, some stocks did survive May’s carnage and could be valuable additions to your portfolio.

May’s Performance

In recent years, May has been a particularly strong month for stocks. But events unfolded quite differently this time around, with indexes snapping a four-month stretch of gains. The Dow, S&P 500 and Nasdaq lost 6.7%, 6.6% and 7.9%, respectively.

The blue-chip index also declined 3% last week, marking the sixth consecutive weekly loss for the benchmark. This comes as no surprise since the index largely consists of multinationals that stand to lose the most from a trade war.

Shares of General Motors (NYSE:GM) and Ford (NYSE:F) declined 4.3% and 2.3% last Friday. The losses occurred because both companies produce significant volumes of cars in Mexico, likely to face fresh tariffs.

Trump’s Protectionist Actions Hurt Stocks

Trade talks between the United States and China did take place last month. But a mutually acceptable agreement remained elusive. China’s state-owned media contended that the Trump administration’s demands would require its government to make major structural changes to its economy.

This is possibly an unviable proposition for the world’s second largest economy, which is powered largely by its cost effective exports. As the two sides failed to reach a deal, U.S. tariffs on Chinese goods worth $200 billion increased from 10% to 25% at 12:01 a.m. on May 10.

In response, China’s government promised to implement strong retaliatory measures. The situation worsened after the Trump administration effectively banned U.S. companies from exporting crucial inputs to Chinese tech behemoth Huawei. Subsequently, U.S. chipmakers declined as blue-chip tech stocks took a massive hit.

Trump has ended the month on a particularly sour note by threatening to impose tariffs on Mexico. These duties will be imposed if Mexican authorities fail to stop the flow of illegal immigrants through the U.S. border.

Significant concessions on border security could end the threat of duties soon. But Trump’s adversarial approach to trade issues will likely continue to weigh on investor sentiment.

5 Star Performers for May

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Written By: Zacks Investment Research