As the U.S. – China trade dispute rages on, the stock market has had a wild week.
After China raised its tariffs in retaliation for President Trump raising the tariffs on imported Chinese goods, stocks fell sharply on Monday. The Dow dropped 617 points, posting its worst session since January 3. The S&P 500 posted its worst day since January as well, dropping -2.4% to 2,811.87. And the Nasdaq had its worst day of the year and dropped -3.4% to 7,647.
By Tuesday, 56% of stocks in the S&P 500 were in correction territory or worse.
But then by Wednesday, stocks were rising on news that Trump has decided to delay the implementation of auto tariffs. The Dow closed up 115.97 points after having fallen as much as 190 points during the session. The S&P 500 gained 0.6%, and the Nasdaq gained 1.1%.
While the threat of the trade war looms over Wall Street, two experts say there are a few stocks that offer safety right now.
“One stock I think looks quite good is Qualcomm (NASDAQ: QCOM),” Miller Tabak equity strategist Matt Maley said on CNBC on Monday. “If you look at the chart between the XLK, the tech ETF, along with Qualcomm, they’d been trading along and very, very tightly correlated for many years and then that broke apart several years ago because of Qualcomm’s legal problems with Apple (NASDAQ: AAPL).”
Last month marked the end of the yearslong patent dispute between Qualcomm and Apple, instantly sending Qualcomm shares soaring. QCOM is up just over 51% year-to-date, and so far this month, eight analysts have boosted their price targets on the stock.
Since the announcement of the agreement reached between the two companies, Maley says QCOM “has bounced nicely. However, it’s still way behind the XLK so even though it could bounce around a little bit and could see weakness here and there, it’s still got a long way to go to make up that divergence. So that could be a good place to hide as we move through this rough patch in the market.”
Michael Binger, president at Gradient Investments, insists that stocks must meet certain criteria to make a good hideout play.
“If you want to stay invested in the market, I think several areas you want to look at are more service-based companies versus product and manufacturing companies,” Binger said, echoing the strategy that Goldman Sachs analysts recommended to clients in a note last week. “You also want to avoid companies that do obviously a lot of business in China and more in the U.S.”
Binger likes two stocks that fit this criteria.
“I really like Amazon (NASDAQ: AMZN) here. It’s pulled back to a nice level. They just had a good quarter, it’s in e-commerce and it’s a service company, so a great holding,” Binger said. “Second one I really like is UnitedHealth (NYSE: UNH). This is a U.S.-based high-quality health insurer. They just had a very, very good quarter. I think that’s OK to buy here, too.”
There are currently 43 Buy ratings on AMZN and the average price target for the stock suggests upside of 17% over the next twelve months. Analysts are also bullish on UNH and there are 18 Buy ratings on the stock and 1 Strong Buy rating. The average price target for UNH is $292.28, indicating possible upside of nearly 24% over the next year.