Markets Brace for Tariff Turbulence

Markets are shifting focus from a tumultuous geopolitical weekend to the looming application of new tariffs, but which stocks offer potential upside?

Handling the Whipsaw

While media coverage focused on the disastrous Oval Office meeting between Ukrainian President Volodymyr Zelenskiy and US President Donald Trump, traders appear to view this as part of a broader geopolitical milieu in which tariffs remain a key concern. European indices saw a positive bias at the prospect of an EU-backed deal to end the conflict in Ukraine with increased defence spending. At the same time, Asian traders focused on China's National People's Congress in hopes of new stimulus measures.

However, all these developments are overshadowed by the potential imposition of tariffs. Trump confirmed last week that a 25% levy on all goods from Canada and Mexico will take effect on Tuesday, while tariffs on China will double from 10% to 20% on the same date, and tariffs on the EU might follow. However, US Commerce Secretary Howard Lutnick suggested the tariffs are in a "fluid situation," hinting at the possibility of a last-minute deal or adjustments to the levies as they are applied.

Tariff-Resistant Stocks?

Tariffs undoubtedly impact stocks, with Goldman Sachs estimating the planned batch could drag S&P 500 earnings by 1-2% from around a 5% drop following previous Trump tariffs. Big tech firms, already under pressure from the DeepSeek impact, could face additional strain due to their reliance on Chinese materials. Meanwhile, companies with significant overseas exposure could face earnings headwinds from a stronger dollar, which is an expected effect of the tariffs.

Potential winners show opposing characteristics, such as companies that source and sell primarily within the US, insulating them from foreign competition. CNBC's Jim Cramer highlighted oil and gas, utilities, and US-based gold producers as potential beneficiaries. With geopolitical uncertainty and inflation risks, gold prices are expected to appreciate, favouring US gold miners like Barrick Gold, which owns the three largest mines in Nevada. The company is a favourite among analysts and is expected to see its earnings increase by 37% in the current quarter.

Barrick Gold Bounces Higher

Barrick Gold has recently accelerated from the lower end of a flag-like channel at $15, suggesting a continuation towards the upper channel resistance at $21 if bulls reclaim the $19 regional peak. However, the stock might face potential risk at the upper channel. On the downside, a drop under the support at $15 could result in a move to $13.

Source: SpreadEx / Barrick Gold

Key Takeaways

While geopolitical tensions and tariff concerns have roiled markets, US companies with domestic operations that have limited foreign exposure could emerge victors. Sectors like oil and gas, utilities, and US-based gold producers may offer a potential upside, though ultimately, investors must follow the tariff tussle carefully.