Three Stock Sectors That (Should) Survive A Trade War

A trade war with China is imminent and that means a potential end to the 9-year bull market. While there are large ebbs and flows in the market, there will always be winners and losers. Yes, even in bear markets there are winners and hopefully, the following areas will get you thinking about ways to work around trying times in the stock market.

Here are the three areas to strongly consider putting your money in advance of the trade war...

Small Caps

Small caps stand at the top of this elite list, explaining why the Russell 2000 Index broke out to an all-time high in May. However, choosing the right plays here is harder than it looks. While many domestically focused businesses will be less affected by foreign affairs, those dependent on rising material costs may find it harder to grow revenues. As a result, it makes sense to focus attention on service-oriented groups like healthcare, software and entertainment.

What's Looking Good?

Glu Mobile Inc. (GLUUmakes mobile games for smartphones and tablets. It came public at $11.50 in March 2007 and posted an all-time high at $14.80 in June. The subsequent decline picked up steam during the economic collapse, dropping to an all-time low at 22 cents, while a bounce into 2011 stalled at $6.10. The stock has spent seven years testing that resistance level, with the sixth rally into the barrier now in progress. Excellent volume support in recent months raises the odds for a breakout that brings the double digits into play.

Biotechnology

Biotechnology stocks could shine if tariffs are thrown up around the world because many of these companies have no commercial products, with their value driven by speculation rather than income. Traders have taken notice of this unique advantage in recent weeks, lifting the SPDR S&P Biotech ETF (XBI) above $100 for the first time in its 12-year history. Keep in mind that "going local" is the key theme here, avoiding larger drug companies that depend on foreign sales.

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Disclosure: The information is provided by Investopedia's article "3 Sectors to Buy in a Trade ...

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