As a wave of global market volatility spooks investors used to cushy returns throughout the most recent nearly ten-year-bull market, they may want to look at stocks that are less vulnerable to U.S. economic deceleration to protect their portfolios. Market watchers recommend buying shares of companies including Airbus (EADSY), Essity (ESSYY), Arcos Dorados (ARCO), Itau Unibanco (ITUB), Lojas Renner (LRENY), Saint-Gobain (CODYY), viewed as gain on acceleration abroad while the US economy contracts, as outlined by Fortune.
Street Warns on Decelerating Domestic Economy
On Sunday, Goldman Sach’s Chief Economist Jan Hatzius issued a note forecasting the U.S. economy to slow significantly by the second half of 2019. The investment bank attributed its more bearish outlook to a handful of factors including tightening monetary policy, the Federal Reserve’s interest rate hikes and fading benefits from the Trump corporate tax cuts, as outlined by CNBC.
Goldman isn’t the only investment firm on the Street becoming more downbeat on the economy, with many forecasting a full-blown recession within a couple of years’ time.
In order to hedge against contracting U.S. growth, investors should consider scoping out firms generating revenues from regions that are on a different curve of their economic cycles than the domestic economy, as outlined by Fortune.
Market Watchers Recommend Stocks of Firms Less Reliant on US Revenues
Within Europe, which has lagged the U.S. market throughout its rally after the recent recession, Saira Malik, head of global equities at Nuveen, likes France-based construction conglomerate Saint-Gobain. The analyst cited the material maker’s insulation from an environment of rising interest rates in the U.S. to weigh on the housing market, given just 13% of its total revenues come from North America.
Malik recommends buying shares of Arcos Dorados, Brazil’s operator of McDonald’s Corp. (MCD) in Latin America, which have fared poorly amid uncertainty regarding the country’s recent presidential race. She expects the restaurant company to double its locations to 4,200 within a decade, driving double-digit earnings growth “for the foreseeable future.”
T. Rowe Price Global Stock Fund manager Dave Eiswert recommends companies including Swedish diaper and toilet paper company Essity and European jet maker Airbus. He expects the South American consumer products maker to experience a “dramatic increase in earnings” around 12% to 15%, thanks in part to lower paper pulp costs. Meanwhile, the money manager views Boeing Co.’s (BA) European rival as a cheaper bet than its US counterpart, trading at a 15% discount based on forward p/e.
“It’s kind of like a Boeing 2.0 but at a lower valuation,” said Eiswert. “And we think in a low-growth world, people still fly in airplanes.”
Eiswert is also expecting a revival in the Brazilian economy to boost companies with a solid position in the region, including Itau Unibanco, as well as department store chain and e-commerce site Lojas Renner.
“Brazil is very, very much off cycle to the rest of the world,” said Eiswert, making the region attractive play when the rest of the world enters a period of deceleration.