(Reuters) - The escalating U.S.-China trade war has sent dividend-rich sectors like utilities higher, but investors don’t need to get all defensive just yet, according to strategists who say there are plenty of growth stocks with some insulation from China.
Some investors are seeking safety in domestic U.S. growth stocks ranging from software and online advertising to aerospace and recruitment since President Donald Trump’s May 5 tweets showed that U.S. talks with China were in trouble.
While the prospect of a prolonged trade war has shaken the market, investors are also trying to protect themselves from the risk that they could miss out on gains in the event that the United States and China reach a surprise agreement.
Because of the difficulty handicapping the chance of a U.S.-China deal, John Praveen Portfolio Manager at QMA in Newark, New Jersey, said he would not “completely sell out” of stocks. But he said: “if I was 5% overweight stocks, I might reduce it to 3 pct and see if I could reduce exposure to semiconductors and technology.”
“If you’re looking to avoid the pure dividend play and avoid the China trade narrative, you have to look at stocks that are a pure play on the U.S. economy,” said Peter Kenny, founder, Kenny’s Commentary LLC in New York.
Broadly speaking, investors have been raising their defenses. While the S&P has fallen roughly 4% since Trump announced his plan to raise tariffs on Chinese goods in early May, utilities - a low-growth sector with reliably high dividends - has risen more than 2%.
But growth-hungry investors are seeking more nimble companies with little exposure to overseas sales or Chinese imports even in the beaten down technology sector, where semiconductor stocks have lead the recent declines.
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