Trump Brings Holiday Cheer For Consumer & Tech Stocks & ETFs
Zacks Investment Research | Aug 14, 2019 01:00AM ET
The July upsurge in the key U.S. indexes wavered to start August as stocks slipped mainly on renewed U.S.-China trade tensions. Investors should note that Trump announced plans to levy a 10% tariff on $300 billion of Chinese imports that aren’t subject to U.S. duties yet. The new tariffs, which covered a host of consumer products, was initially said to be put into effect on Sep 1 (read: Fed & Trade Trigger Market Bloodbath: 6 Hot Inverse ETF Areas ).
However, U.S. President Donald Trump backpedaled his Sep 1 deadline for 10% tariffs on many Chinese imports, and delayed duties on cellphones, laptops and other consumer goods, in order to not dampen U.S. holiday sales. The United States Trade Representative office noted that new tariffs on certain consumer items would be held off until Dec 15.
Investors should note that as tariff tensions have heated up, consumer stocks are under immense pressure. An analysis by J.P. Morgan’s chief equity strategist Dubravko Lakos-Bujas indicated “that two-third of the products to be hit by the impending round of tariffs are concentrated in the technology and hardline and grocery retail are the hardest hit this time.
Retailers will try to pass on some burden of higher costs to consumers, thereby raising prices. This is likely to bump up inflation levels in the U.S. economy. Higher inflation in turn will give a boost to bond yields. This would increase consumers’ outlays and hurt ETFs.
How the New List & Deadline Affect Consumer & Tech Sectors?
The latest announcement of an almost $300 billion list of products from China has been segregated into two separate parts. according to a Bloomberg News analysis of last year’s import figures .
“Flat screen televisions from China, a category worth $4.5 billion , also will face 10% tariffs” on Sep 1. Live animals, dairy products, skis, golf balls, contact lenses, lithium ion batteries and snowblowers will also face tariffs on Sep 1, per Reuters.
However, big-ticket items like smart-phones, laptops, and children’s toys, worth about $160 billion, will not bear the brunt of higher tariffs until Dec 15. Per USTR, there will be a delay in tariffs on items where China supplies more than 75% of total U.S. imports. Product categories where China supplies less than 75% will face higher tariffs starting Sep 1, per Reuters .
Consumer Stocks & ETFs Shine
With the holiday season being all-important to the consumer discretionary (and the technology sector to some extent), such delay on major products came as an early Christmas gift. Most retailers would try to stock up their holiday merchandise before the September deadline .
The Retail Industry Leaders Association said “removing some products from the list and delaying additional 10% tariffs on other products, such as toys, consumer electronics, apparel and footwear, until Dec 15 is welcome news as it will mitigate some pain for consumers through the holiday season,” as quoted on Reuters .
Get The News You Want
Some of the top-performing consumer stocks on Aug 13 were clothing and footwear companies like Centric Brands Inc. CAL) , PVH Corp. (NYSE:PVH) (up 3.6%) and Steven Madden Ltd. (NASDAQ:SHOO) (up 3.4%).
Toy companies Mattel Inc (NASDAQ:MAT). (NYSE:MA) (up 4.6%) and Hasbro Inc (NASDAQ:HAS). HAS (up 2.8%) were among the top gainers. Beverage company Castle Brands Inc. (NYSE:ROX) (up 5.7%) and food company Freshpet Inc. (NASDAQ:FRPT) (up 5.4%). Retailer Best Buy Co. Inc. (NYSE:BBY) added about 6.5%. Discount retailer Dollar Tree Inc. (NASDAQ:DLTR) added about 4%.
Retail ETFs like SPDR S&P Retail (NYSE:XRT) ETF all Consumer Discretionary ETFs here).
Mixed Impact on Tech; Key Stocks Sizzle
According to U.S. Census data, “China TVs, smart speakers and desktop computers .
Electronic equipment companies like Koss Corporation new import taxes until mid-December .
Investors can also find strength in Apple-Heavy ETFs like iShares U.S. Technology ETF all Technology ETFs here).
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