Why Johnson & Johnson (JNJ), United Health (UNH) And Procter & Gamble (PG) Are Holding the S&P 500 From Dropping More

One of the most controversial policies proposed by President Trump has been his innovative deployment of tariffs. He has already used tariffs as a negotiation tool to motivate Canada and Mexico.

He has also highlighted international tariff disparities with other nations that tax US goods much more highly than the US tariffs on those countries’ exports.  India recently announced an agreement with the US to slash their tariffs on US goods by 55% and to increase US imports by billions of dollars in the future.  Taiwan Semiconductor, the manufacturer of the highly coveted Nvidia and AMD GPUs required to operate Artificial Intelligence, announced a $100 billion investment for new Arizona located factories to produce GPUs in the US expressly for the US market, thus avoiding US tariffs. 

President Trump announced that April 2nd will be “Liberation Day”, and it will commence the start of a wide range of tariffs specifically designed to be reciprocal with other nations’ goods. He has stated that lower tariffs from other nations on US goods will trigger a reciprocal response from the US on imports from those countries, with the goal of a free trade even playing field. 

The impact of tariffs on such a wide range of industrial goods and products, which can range from electronics to commodities and a wide range of wholesale and retail items, is understandably creating uncertainties in the market, thus causing a precipitous selloff as April 2nd approaches. The S&P 500 Index has already lost 60 points since mid-February, as fears of drastically reduced revenues and earnings are anticipated for many companies whose products are manufactured offshore. 

Defensive companies, which are categorized as such because their products or services are considered necessities, thus making them less prone to market fluctuations, are often an equity flight to safety during times of market uncertainty. Even better is when those companies have individual positive news with which to justify buying on its own merits apart from market fears. The following 3 companies are actually up at the time of this writing, helping to support the S&P 500 from dropping further. 

Johnson & Johnson (NYSE: JNJ)

A highly regarded Dividend Aristocrat stock and pharma stalwart, Johnson & Johnson also offers a huge catalog of medical care devices, pharmaceuticals, and essential personal care items in its catalog. The company’s industry leading 25% return on capital ratio and low P/E make it attractive to institutions and individuals alike. JNJ announced recently that it launched Dualto, a new power generator for its electrosurgical devices, designed to minimize bleeding and to accelerate healing. 

United Healthcare (NYSE: UNH)

United Healthcare is the largest US health insurer. Given how healthcare is such a major concern, UNH finds itself as the 800-lb. Gorilla in the sector.  CNBC’s Jim Cramer, who acknowledges the rationale for the tariffs and concurs with President Trump, advised buying UNH on any perceived dip, as he feels that “United Health is every bit as powerful as the government…and the government has historically not been able to take on this group.”

Procter & Gamble Group (NYSE: PG)

Procter & Gamble’s range of personal care, housekeeping, and other products are perennial favorites in households around the globe, making it one of the top consumer staples companies in the industry. A recent analysis found that PG’s current price range represents a 21% undervaluation. As PG is also a Dividend King (50+ consecutive years of dividend increases), so resultant buying as a flight to safety choice is becoming evident of late. 

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