Cover story: Despite the fact Donald Trump has escalated the trade war with China—though both countries will be able to withstand tariffs—the market is likely to prove resilient, and investors should “put aside the playbook for a trade war and global recession for now, but be prepared for uncertainty and bouts of stock market volatility for months to come.”
Features: 1) Positive on AMAT, BWA, SCHW, REGN, TPR: Five stocks are cheap, with decent long-term growth prospects, and aren’t likely to face volatility because of the U.S.-China trade war; 2) Positive on BID, Christies, Phillips: Despite trade-war worries and stock market volatility, recent auctions in New York show a healthy luxury market, full of super-rich buyers as competitive as ever over precious works; 3) Positive on JWN: The Seattle-based retailer remains the best-positioned in the tough department-store sector, with a mix of full-price and discount stores, a pioneering online presence, and a reputation for superior service and affluent customers; 4) Positive on CERN: Shares have been “dead money” after an boom in 2015, because most doctors’ offices have embraced electronic health records, but they have become a hot investment again as big tech gets involved, and Cerner and other big players could be in a position to profit; 5) While industrial metals like copper have sold off since the U.S.-China trade dispute re-escalated in early May, the long-term consequences won’t be severe, barring a global recession—but soybeans are another story, and the farm belt will take a hit.
Tech Trader: Positive on TTWO: While gaming giants EA and ATVI deal with disappointing releases, questionable pipelines, and declining enthusiasm for their non-sports franchises, Take-Two’s core game properties have proven to be stronger than ever—the company is in some ways the DIS of the videogame sector.
Trader: Investors have become accustomed to central banks stepping in to bail out the markets, and there’s no reason to expect that to change—monetary policy could soon be joined by government spending of epic proportions to keep the economic cycle going; Cautious on KSHB: Even the cannabis industry will be hit by the U.S.-China trade war—the fast-growing company that supplies cannabis producers with packaging, chemicals, and vaping hardware war imports most of its goods from China; Cautious on PINS: Company “violated a cardinal rule of earnings conference-call management” by giving weak guidance: if a company can’t impress Wall Street out of the gate, investors will assume something ominous is brewing.
Interview: Nancy Lazar, chief executive of Cornerstone Macro says escalating tensions with China will trim U.S. growth, and may damage business confidence, but that the U.S. has underlying strength that will persist even though the expansion is “long in the tooth.”
Profile: Masakazu Takeda, manager of the Hennessy Japan fund, takes a long-term, value-oriented philosophy with the $645M fund that has just 25 holdings—and isn’t a pure play on Japan (top 10 holdings: Softbank Group, Shimano, Nidec, Daikin Industries, Keyence, Recruit Holdings, Fast Retailing, Kao, Kubota, Unicharm).
European Investor: As European Union voters head to the polls later this month to elect a new parliament, “the political fragmentation of Europe suggests that their decisions could contribute to a near-paralysis of EU institutions.”
Emerging Markets: China dominates emerging markets, accounting for one-third of global indexes, but the other two-thirds includes countries such as India that are relatively insulated from Beijing’s escalating trade conflict with Washington—and home to some exciting growth companies.
Commodities: Oil trading has been particularly volatile lately, as concerns mount about threats to both global supplies and demand—“The geopolitical risk environment is dangerously close to the levels we haven’t seen since the early stages of Operation Iraqi Freedom” says Robbie Fraser of Schneider Electric.
Streetwise: Real progress is being made in the fake meat industry, and companies such as BYND and Impossible Foods are growing, but big players such as TSN may get into the game, and investors may want to hold off on the shares for now.