3 Unconventional Stock Picks After the Trade War Détente

Financial markets are buoyant following a détente in the trade war between the U.S. and China. The S&P 500 has now clawed back more than half of its losses from its more than 20% decline between mid-February and early-April. Here’s a more detailed market update.

The price action is reminiscent of previous V-shaped rallies that took stock markets to new highs. The most recent instances were the post-COVID rally in 2020 and December 2018 following President Trump’s first trade war with China. 

In today’s newsletter, I want to discuss how the market is mostly reverting to conditions that were intact prior to the trade war, while noting some important changes in the investing landscape. Then, I will discuss 3 picks to take advantage of these developments.

In many ways, the world is returning back to the pre-tariff status quo. But, there are some major differences: 

• Tariffs are now effectively at 30% on Chinese imports and 10% for the rest of the world. It’s equivalent to throwing sand in the gears of the global economy which will have long-term effects rather than short-term seizures and disruptions. 
• Scott Bessent has won the internal battle among economic policymakers in the Trump White House. This camp views tariffs as more of a negotiating tool rather than a way to reorder the global economy.
• Oil prices are lower, while gold prices are higher.
• International stocks and bonds are outperforming U.S. stocks and bonds.

Looking ahead, the US government’s fiscal situation and negotiations around President Trump’s tax cuts will become the temporary focus of markets, assuming that the 90-day pause results in progress towards trade deals. Below are 3 opportunities that investors should consider in this environment:

Chinese Stocks: Appreciate the Resilience

It’s instructive that both China and the US blinked following a month of aggressive posturing and threats. Both adversaries realized that they have more to lose than to gain with tariffs at such steep levels that it’s effectively an embargo.

It’s a major catalyst for Chinese stocks as it neutralizes a source of uncertainty. Chinese stocks are also attractive from a fundamental perspective. According to David Tepper, the CEO of Appaloosa Management, China offers undervaluation combined with stocks offering double-digit growth. He noted that “When China wants to boost their stock market, the government will stop at nothing." 

China is also looking to boost domestic consumption to offset negative impacts from tariffs. Therefore, investors should consider stocks that would benefit from an increase in consumer spending and borrowing. 

Buy Momentum Stocks: Ride the Rally

Navigating this market requires discipline. Following one’s emotions and/or being stubborn can compromise long-term performance. 

Having a plan and leveraging proven and high-powered, quantitative systems like the Zen Ratings, is essential to taking advantage of opportunities created in these markets. 

Momentum stocks are an example of a unique opportunity in this type of market. This is appropriate for those who believe that the market is in the midst of a V-shaped rally.

Momentum strategies work very well in these types of markets. Many fund managers have been shaken out during the selloff and are underinvested or positioned short. This means there is more fuel on the sidelines to power prices higher as they look to keep up with their benchmarks. 

You can use this screen to identify the best momentum stocks among Strong-Buy rated stocks.

Interest Rates: Higher for Even Longer

Another consequence of trade tensions dissipating is that recession risk is reduced as well. This was reflected in Treasury yields moving higher following Sunday’s announcement. Currently, the yield on the 10-year is at 4.45%, compared to a low of 3.9% in early-April soon after ‘Liberation Day’ when trade fears peaked.

Beyond lower tariffs, yields should continue to rise as the Trump tax cuts and Republican spending bill are projected to be larger than expected, while spending cuts are much smaller than initially expected. Further, these measures are expected to be paired with the debt ceiling increase to avoid a government shutdown.

This matters, because it means that Republicans are more likely to go along with the bill, even if they have reservations, increasing the likelihood of passage.

Overall, deficits are likely to increase. Tariffs will contribute to inflationary pressures. Thus, yields are likely to keep trending higher. 

3 Top Stocks To Watch 

These 3 stocks are well-positioned to capitalize on these trends:

1. FinVolution Group (FINV)

FinVolution Group (FINV) is a fintech platform that connects borrowers and lenders in China and Southeast Asia. It utilizes AI to make credit assessments and manage risk to serve underserved markets. 

As of February 2025, the company had 150 million users. Last year, it processed over $25 billion in loan transactions, an 18% increase from the previous year. For investors, FINV offers low valuation and impressive growth. It has a forward P/E of 5.2, and analysts forecast 21% growth in earnings this year. It’s also expanding into markets like Indonesia and Philippines which it sees as key to future growth. 

FINV is rated an overall Strong Buy (A) rating according to the Zen Ratings. Strong buy rated stocks have produced an average annual return of 32.5% since 2003, outpacing the S&P 500’s average 10.5% annual gain. 

Out of a universe of over 4,500 stocks, FINV ranks in the top 3% for Momentum. This is consistent with the stock’s recent outperformance in addition to its turnaround in earnings and improvement in margins. 

2. LexinFintech Holdings (LX)

LexinFintech Holdings (LX) is another Chinese fintech stock. While FINV draws comparison to Upstart Holdings (UPST), LX is compared to Affirm (AFRM) which offers installment loans and targets a younger demographic.

Currently, LX has over 100 million registered users and is able to approve loans in minutes, utilizing big data and AI to assess creditworthiness. Last year, the company originated $15 billion in loans, a 22% increase from the previous year. 

The company has a P/E of 4.1, and analysts forecast earnings growth of 41% this year. Despite lending to riskier borrowers, the company had a low default rate of 3% in 2025. The company also has a decent margin of safety given $500 million in cash, equivalent to 40% of its market cap, and a low debt-to-equity ratio. 

LexinFintech is in the top 1% of all stocks in the Zen Ratings Universe due to its growth prospects, strong financial health, low valuation, and improving margins. 

The company also has strong Component Grades including an A for Momentum and a B for Growth. Click here to see more.

3. Prudential PLC (PUK)

Prudential PLC (PUK) is a leading insurance and asset management provider with over 50 million customers across 24 markets in Asia and Africa. The company generates revenue through life insurance premiums, annuities, and investment management fees, with $1.4 trillion in assets under management as of 2024. 

PUK is a strong investment due to its attractive valuation and growth catalysts. It trades at a forward P/E of 9.9, significantly below the S&P 500’s forward P/E of 22 and offers exposure to rising rates and international markets. Its strong position is underscored by the company’s 13% dividend hike and increase to its share buyback program. 

Prudential is rated a Buy (B) by the Zen Ratings due to this combination of safety, value, and growth. B-rated stocks have posted an average annual performance of 19.9%. 

The stock ranks in the top 5% for Momentum and top 10% for Growth. The latter is reflected in Wall Street analysts forecasting 21% annual earnings growth for the next 3 years. 

Conclusion

The stock market has been on a roller coaster ride over the last 3 months.

But, the ride seems to be ending — for now. 

It appears we’re entering a new regime that requires a fresh playbook — adding high-quality stocks like the ones mentioned above are a powerful way to uplevel your strategy. 

What to Do Next?

• 200 Stocks to Sell Now >
• See All “A” Rated Stocks with +32.52% Average Annual Return >
• 2 New Stocks to Buy from Steve Reitmeister >

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