Reportedly, Goldman Sachs has a new plan for tackling the trade war, which is to purchase service-providing stocks and avoid the goods-manufacturing companies. The tactic involves purchasing companies like Google, Amazon, Microsoft, and J.P. Morgan Chase as the U.S.-China trade spat has affected share price and basics of goods-producing firms. In a note to clients, David Kostin—Chief US Equity Strategist at Goldman Sachs—stated, “Services stocks have less exposure to trade spat as they have decreased overseas input costs that may be subjected to levies and lower non-US sales compared to goods companies.”
The trade battle amid the U.S. and China shot up in the last couple of weeks following President Donald Trump’s unexpected announcement of 10% taxes on Chinese imports worth $300 Billion that had avoided duties. The markets experienced their worst day of the year on August 5, following China let its currency diminish, crossing the 7 yuan-per-dollar levels, and stated it would stop imports of agricultural commodities from the U.S. Kostin reported the services stocks including Verizon and Facebook to have earnings growth and faster sales, in addition to more stable edges than goods companies.
On a related note, recently, corporate America was worried over surging toll from China trade spat as it will dent their companies’ revenues. Since the second-quarter proceeds season came to an end, almost half of the 102 firms that have cited Chinese progress trends on earnings were in a negative context, which shows a sharp rise from less than a third in the first quarter, as per to an analysis from BAML (Bank of America Merrill Lynch). Around 70% of the companies cited that tariffs were specifically negative. The fading emotion came as the two largest economies globally expanded their deadlock over trade, impacting investor assurance that US-listed firms exposed to China would be spared.