Wall Street is experiencing what some have dubbed “unprecedented” chaos. The market opened deep in the red on Monday, April 7 but swung rapidly back and forth after rumors of a 90-day tariff pause. Although the market stabilized by the end of the trading day, the underlying problem is still there. Investors are very uncertain about where this trade war is heading since the ripple effects will soon start to hit consumers.
Unless President Donald Trump’s administration decides to negotiate and makes dozens of deals with individual countries to lower the “reciprocal” tariffs slapped on them, the market will likely keep bleeding. As such, it’s a good time to retreat into consumer staples stocks. Here are three that are unlikely to take big hits from a trade war-driven downturn.
Consumer Staples Stock #1: Lamb Weston
Lamb Weston (LW) is the largest frozen potato producer. Potatoes have very inelastic demand due to how widespread they are in the food people eat. For instance, 80% of U.S. restaurants have potato products on their menus, and demand is going to grow as long as the population grows.
Lamb Weston posted 4% year-over-year sales growth in its fiscal Q3 to $1.52 billion and beat earnings estimates by 24%. CEO Mike Smith’s restructuring plan targets $55 million in pretax savings for 2025 and $85 million by 2026 to boost earnings more.
It also has localized production in key markets to minimize import tariff exposure.
The stock is currently down more than 35% from its 52-week high and trades at 18 times trailing earnings. The mean price target at $65.64 implies 16% upside potential here, but the biggest draw for the stock is that it is trading at historically cheap prices with little downside risk.LW also comes with a 2.6% dividend yield.
Consumer Staples Stock #2: McDonald’s (MCD)
McDonald’s (MCD) is touted as one of the few companies that not only made it out of the Great Recession unscathed, but benefitted from the economic downturn. Even during COVID-19, the company managed to stay afloat as other restaurant-related companies plunged and weren’t able to recover for months.
The recent downturn brings its own pros and cons for McDonald’s. The company is relatively well-insulated from tariffs and has been localizing sourcing for its beef and potatoes. It has been testing a shift to fresh patties in the U.S. and reduced its reliance on cross-border logistics, although this introduces other supply chain complexities for McDonald’s.
All things considered, it’s pretty solid. The mean price target of $331.48 implies more than 10% upside potential, and MCD also yields 2.36%.
Consumer Staples Stock #3: Colgate-Palmolive (CL)
Colgate-Palmolive (CL) is probably one of the safest long-term stocks you can buy in the current environment. People are not going to cut back on brushing their teeth, recession or not. Even in a trade war, toothpaste brands are not large enough purchases for most people to be picky about, and Colgate is in a much better position than any other toothpaste company.
The stock has mostly traded sideways for years but rose significantly in 2023 due to solid results. CL stock is at a discount right now after an 18% decline from its 52-week peak. It is unlikely to recover anytime soon, even if investors pile into defensive stocks, since Colgate doesn’t offer the growth that many other defensive picks tout. However, the long-term safety profile here is great.
The dividend yield here is 2.33%. The mean price target at $99 implies 11% upside.
