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Investing.com -- Bank of America analysts are advising investors to seek shelter in large-cap value stocks as markets reel from the latest round of U.S. tariffs.
The firm described large-cap value as the sector that "ticks all boxes" for stability, liquidity, dividend payouts, and inflation protection in the current environment.
While the bank did not suggest any specific names, companies such as JP Morgan Chase (NYSE:JPM), Exxon Mobil (NYSE:XOM), Procter & Gamble (NYSE:PG), Walmart (NYSE:WMT), and Coca-Cola (NYSE:KO) fall under the category.
President Donald Trump’s new trade measures, announced on April 2, have significantly increased the risk of economic disruption.
BofA noted that the tariffs include "additional 34% tariffs on Chinese imports on top of the 20% announced earlier this year, 20% against the EU (where the S&P 500 has the largest sales exposure) and a comprehensive list of other regions’ tariffs slated to hit on April 9."
A "10% tax on all imports is scheduled to begin this Saturday," pushing the effective tariff rate from "9% to 20% on new proposed tariffs, a bigger move than expected."
The firm’s stress test of the tariff impact suggests a substantial hit to corporate earnings. "
An oversimplified stress test of higher import costs and lower export demand translates to a 5%-35% hit to S&P Op Earn," BofA estimated.
If trading partners impose equal retaliatory tariffs, it warned that "reciprocal tariffs could hit current S&P 500 operating income by 32%."
Given the uncertainty, BofA sees large-cap value stocks as a safer choice. "If stagflation is the enemy, companies helped by inflation and higher nominal rates, with less global exposure, stable earnings and dividends may be the safer route within the S&P 500," the analysts wrote.
While negotiations could provide a market catalyst, BofA cautioned that "leadership caving to the US would be impolitic, and negotiations that can be cast as win-wins may be hard to get done quickly."
For now, the firm emphasized that staying liquid and protecting against shocks should be the priority for investors.