Fears of a full-on trade war with China have been on top of investors mind for months. The volatile stock market suffered its worst year since the financial crisis in 2018 with the S&P 500 tanking a whopping 14 percent in the fourth quarter. U.S. companies have also sounded alarms on the trade war’s impact on their business.
“Any deal would likely see a relief rally as we believe markets have meaningfully priced in risks of trade tensions escalating,” said Ben Laidler, HSBC’s global equity strategist in a note on Tuesday. He also pointed out that tariff-sensitive stocks have underperformed significantly and their valuations are getting cheap.
To find the best names to buy on a trade-deal pop, HSBC ran a screen looking for stocks with three main attributes:
- Listed U.S. stocks with revenue exposure to China of more than 20 percent.
- Underperformance during this three-month market pullback on trade deal concerns.
- Cheap valuation on a forward price-earnings basis.