Despite a reputation for being a boring investment, there’s nothing tedious about consumer staples giant Procter & Gamble (NYSE:PG) this year. Since January’s opening volley, the PG stock price has gained over 39%. That compares very favorably to the less than 4% return that stakeholders saw in 2018.
However, with the apparently warming ties between the U.S. and China, many investors are probably reconsidering Procter & Gamble stock. Let’s face it: most folks are interested in PG stock as either a defensive play or as a stable platform for passive income. But without the incentive to protect against volatility, shares lose some of their luster.
Moreover, the headlines suggest that investors should reconsider their previously pensive stance. Primarily, President Trump hinted at the possibility that he could sign a “phase one” deal with China as early as next month. Just as importantly, Wall Street didn’t view this development as mere bluster, sending the major indices higher.
As expected, the PG stock price also closed higher on the news, but barely. Up only 0.2% on positive geopolitical implications, many stakeholders are right to raise their eyebrows.
Going even further on the sudden sentiment shift, CNBC’s ever-entertaining Jim Cramer made a bold statement: analysts who stated that the trade war would significantly damage America’s economy need to apologize.
In my view, that’s a little much. After all, we didn’t hear many apologies from the big banks when they catalyzed a global recession a decade ago.
And despite this sudden shift toward risk-on names, I’d remain cautious. Procter & Gamble stock remains a viable investment, as we’ll discuss below:
Economic Factors Benefit the PG Stock Price
As you know, Procter & Gamble specializes in necessary consumer staples, especially as it relates to the bathroom. Levering brand names such as Head & Shoulders, Charmin, Scope, and Vicks, among many others. PG stock is always relevant.
And while the upcoming holiday season will bolster retail and consumer companies, don’t overlook Procter & Gamble stock. Last year, more than 54 million Americans traveled for the Thanksgiving holiday. Reasonably, we should expect similar figures this year: this means a lot of eating, drinking, and activities in which using Charmin products will be most appropriate.
In other words, you can expect the PG stock price to also receive a holiday boost.
Furthermore, I’m not entirely convinced that President Trump has a handle on these high-level negotiations. For one thing, Trump talks a good game (he always does), but reality doesn’t always jive with his perception of it.
A prime example: Trump looked weak compared to Russia’s Vladimir Putin at the 2018 Helsinki Summit. Therefore, I’m not entirely sure what will come of this supposed deal. Either way, it’s not yet time to let go of a safe equity like PG stock.
Plus, the Trump administration has a credibility issue with its Chinese counterpart. While Cramer may want an apology from the bears, keep in mind that not too long ago in August, Bloomberg reported that Beijing was leery about signing any trade deal.
Why? Simply put, Trump acted erratically, often flip-flopping on key issues or making up his own facts. That suggested to China that the President was not reliable. As a result, the Chinese focused their efforts on making their economy independent in case talks go awry.
Now, we’re supposed to believe that it’s game on because Trump said so? We’ve seen this game before.
Procter & Gamble Stock Will Stay Relevant
Even if Washington reaches a deal with Beijing – and that’s a big “if” – the trade war has already damaged the U.S. economy. For instance, American manufacturing performance metrics took a big hit in September. Also, some evidence suggests that the U.S., not China is the bigger loser in the wave of retaliatory tariffs.
Of course, the awkward reality is that the U.S. must hold China accountable for its intellectual property theft; otherwise, we lose credibility with the international community. However, this is an incredibly contentious issue because China does not like losing face. Therefore, I don’t see a substantive deal materializing.
Whether I’m right or wrong isn’t the point. Rather, it’s acknowledging the uncertainty. Unlike some analysts, I’m not ready to adopt a gung-ho attitude toward risk-on names. Instead, I view the rising PG stock price as confirmation that investors are still largely defensive.
Stated differently, if you have Procter & Gamble in your portfolio, there’s no reason to abandon ship now. This is a relevant name until facts – not assertions – prove otherwise.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
