With some experts predicting an economic slowdown, Macquarie has revealed which sectors could be hit the hardest.
In times of economic downturn, investors can turn to more defensive stocks.
Defensive stocks are shares in (usually) mature, dividend-paying companies. These companies also have a record of consistent profits regardless of the state of the broader economy.
Similarly, Aussie investors can turn to other investment options like gold or bonds.
In a report released by Macquarie on Tuesday, the broker provided analysis on the big four banks and the impact of potential RBA rate cuts and global tariffs.
The report also analysed what sectors could potentially see an economic slowdown.
According to Macquarie:
There could be some risk of higher credit losses as the domestic economy slows. While, we don't expect a material rise in bad debts from US tariffs, there is a risk of disruption or potentially reduce demand for some sectors, specifically.
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Agriculture
The broker emphasised that agriculture could potentially be the most impacted sector.
Agriculture is potentially most impacted with ~10% of agricultural exports going to the US (albeit ~30% of meat exports). However, we don't expect these exports to be totally halted given the relatively low 10% tariff.
ASX-listed agricultural companies sit within the consumer staples sector of the share market.
Mining and energy
Macquarie indicated that mining and energy could see a positive or negative impact from global tariffs and economic slowdown.
According to the broker, this largely depends on commodity prices and demand. The broker noted that "Chinese stimulus potentially [provides' some offset to lower global growth."
On Monday, The Motley Fool's Tristan Harrison tipped two mining companies that could have upside for investors:
- Rio Tinto Ltd (ASX: RIO) – Down 9.09% over the last month
- Sandfire Resources Ltd (ASX: SFR) – Down 15.91% over the last month
Education and tourism
According to the report, education and tourism exports could be impacted by lower global and Asian growth.
The logic here seems pretty straightforward – during an economic downturn, travel and tourism spending can decrease due to consumers having less disposable income.
Simultaneously, hotels, airlines, travel agencies may face higher operating costs and reduced demand, leading to fewer services or higher prices.
Macquarie also suggested that some of this downturn could be offset by mix shifts as the US becomes a less attractive market.
For those who believe Australia could benefit from such a shift, opportunities could lie with companies such as:
