In trade war between US and trading partners, small stocks may fare best

In trade war between US and trading partners, small stocks may fare best:





AP APTOPIX CHINA POLITICS I CHN

In a trade war between U.S. and trading partners, small stocks
may fare best
Adam
Shell, USA TODAY Published 6:30 a.m. ET March 23, 2018
If a
big-time trade war breaks out between the U.S. and its trading partners,
small-company stocks will be far from the front lines.
In
general, a trade war isn’t good for stocks because it likely will hurt the
global economy and profits of big companies that do a lot of business globally.
The winner in the event of a trade war, therefore, will likely be small
American companies that get most of their sales from the United States, says
Alec Young, managing director of global markets research at investment firm
FTSE Russell.
Fears
of a trade war rose Thursday after President Trump said the U.S. plans to
target China with an estimated $60 billion in tariffs on goods it imports to
the U.S. That move follows Trump’s earlier decision to slap tariffs on steel
and aluminum entering the U.S.
Small-cap
stocks in the Russell 2000 stock index have a few things working in their favor
if Wall Street’s protectionist worries come to fruition.




Their U.S.-focused profit stream tops the list. “Small-cap stocks have been
able to weather escalating global trade war fears better than their large-cap
counterparts primarily because they have less of their sales coming from
international markets than big multinationals do, so they have less to lose from
trade conflicts,” Young explains.


Another
plus: The Russell 2000 also has “less exposure” to technology stocks -- an
industry group with a lot of global exposure -- than large-cap indexes, adds
Young. The small-company index has a 17% tech weighting, vs. about 25% for
indexes that track large stocks.
'via Blog this'

Comments

Popular posts from this blog

The DuPont Identity: A vital key to understanding the Financial Markets

The corporate debt problem refuses to recede..click on link,