Protectionist trade policies have really been whipsawing the market. The S&P 500’s seven-day defiant rally in the face of ongoing trade war bluster has suddenly been stopped in its tracks after president Trump escalated China tariffs from $34 billion to $200 billion—or at least has threatened to.
The latest move by the president has sent shockwaves through the markets, which believes he intends to make good on his threat to eventually bring a total of $500 billion in Chinese goods under tariffs.
China is yet to respond with its own tit-for-tat tariffs on US goods. But experts though fear that Beijing is likely to disrupt operations for American automakers, retailers and possibly even semiconductor chip manufacturers like Skyworks Solutions and Qorvo, which derive more than half their revenues in the Middle Kingdom.
Consequently, stocks in the sector were selling off quite heavily in Wednesday trade as seen on the SOXX chart below:
S&P 500 Index (SPX) vs. iShares PHLX Semiconductor ETF (SOXX) 5-Day Change
(Click to enlarge)
Source: CNN Money
Still, there are stocks that remain on the upswing and are likely to continue riding long-term trends despite ongoing trade wars and geopolitical instabilities.
These three key trends will continue to shape the global economy for years to come—trade war or no, and economic uncertainty aside. Those stocks and ETFs riding these trades should be good bets for anyone who’s having trouble putting together a diversified portfolio right now:
#1 Artificial Intelligence
Throughout this year and last, the term “artificial intelligence” became branded in everyone’s mind not only as an inevitable reality for the future, but as the present-day Holy Grail. And unlike Trump foreign policy, it’s not smoke and mirrors—or a mirage. It’s the key to the global balance of power, and as far as ‘strategic’ industries go, it’s top tier. Related: Ex-Goldman Banker Caught In A Billion Dollar Fraud Scandal
It’s quickly disrupting businesses and the workplace from chat bots, robotic secretaries and virtual agents to deep learning platforms and biometrics. Companies are now using AI to automate repetitive tasks such as hiring (e.g. HR company oMelhorTrato.com that uses AI to rapidly sift through thousands of CVs) or even automate cognitive workflows such as writing code (e.g. cognitive automation company Coseer).
Despite the impressive progress in the field, AI is still at its infancy with Gartner classifying it in the early innovation phase of emerging technologies hype cycle. Nevertheless the industry is growing fast, with the IDC predicting AI spending will top $50 billion by 2021.
(Click to enlarge)
There are no pure-play AI companies as such, but good proxies include:
• Tableau Software (NYSE:DATA)-- specializes in visualization products that focus on business intelligence systems. DATA stock is up 53.6 percent YTD.
• AeroVironment (NASDAQ AVAV)—a drone-maker. AVAV stock has gained 28.3 percent YTD.
• HubSpot (NYSE: HUB)—industry leader in leader in web analytics, SEO, social media and content management. HUB stock is up 44.5 percent YTD.
If you just need general exposure to the field, tech ETFs such as QQQ, XLK and VGT are good picks. The three have tucked on YTD gains of 13.1 percent,11.8 percent and 13.4 percent, respectively.
E-commerce is the present-day opiate of the masses.
As retail dollars continue moving away from brick-and-mortar establishments into online commerce, e-commerce has been growing at a robust clip—up 16 percent year-over-year to $390 billion in 2017. But the industry is not just thriving in developed markets—Asia-Pacific e-commerce expanded at a brisk 31 percent this year, thus suggesting that this is a global secular trend that will be here for years to come.
Some stocks to tap e-commerce growth include:
• Amazon (NASDAQ:AMZN)—one of the largest and fastest growing e-commerce players in the world. AMZN stock is up 50.1 percent YTD.
• XPO Logistics (NYSE:XPO)--freight and logistics company that focusses on last-mile delivery of heavy goods such as appliances and furniture. XPO stock is up 8.2 percent YTD.
• Booking Holdings (NASDAQ:BKNG)—formerly known as Priceline.com, Booking Holdings is a leading online travel agency (OTA). BKNG stock has increased 18.2 percent YTD.
For a wider exposure, Amplify Online Retail ETF(IBUY) is a nice pick. IBUY ETF is up 28.3 percent YTD.
There’s always a lot of hoopla surrounding the biotech industry—and that is not about to fizzle out. At least not with ageing baby boomers consuming more medical services than the generations ahead of them as well as the trend of ever-increasing incidences of lifestyle-related diseases like diabetes and cardiac failure. There’s also the fact that America and Europe are getting decidedly older in a creeping demographic catastrophe.
Picking biotech stocks, however, is a tricky affair. A single failed clinical trial for a new drug can send an otherwise solid stock spiraling into the depths of hell while a successful trial can make a loser look like a rock star overnight. For instance, erstwhile downtrodden Viking Therapeutics (NASDAQ:VKTX) is having a banner year. Its stock is enjoying a strong sympathy rally—up a blistering 147 percent YTD--mainly on hopes that its experimental NASH drug, VK2809, will enjoy a breakthrough because it works on the same mechanism as Madrigal Pharmaceuticals' (NASDAQ:MDGL) MGL-3196, which recently recorded positive mid-stage trial. MDGL stock has exploded 218 percent higher YTD.
Wide exposure through biotech ETFs such as SPDR S&P Biotech ETF(XBI) is normally a safer bet. XBI is up 17.5 percent YTD.
By Josh Owens for Safehaven.com
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