Get out of China.
That's been the watch phrase for more than a year now -- and that's what's been happening.
How do we know this? Let's take some obvious stocks that should be substantially lower than they are now: Dollar General (DG) and Dollar Tree (DLTR) . These are, for the most part, "Made in China stories."
First, we can't even tell how much of their products are sourced in China, but one things is for certain, if you scrutinize the labels and look at the goods, you know these products aren't made in the USA.
Second, we know that these stores are in the most "trouble" when it comes to having to eat the tariffs -- even if the President says the Chinese pay the tariffs -- because they can't break the buck.
Third, if things get really bad because of a slowdown from tariffs, all retail will be hurt, including the trade-downs.
Yet where are these stocks? Dollar General, which didn't even have a good quarter, is $4 from its $126 high and up 13% for the year. Dollar Tree is at $105, down $6 from its high and still up 17% for the year. Those don't sound like the stocks of companies that are on the front lines of Chinese tariffs. It's just so hard to reconcile what the market's thinking about retail when you consider these two.
The only way to really think that there's something going on here that's in keeping with what the President has said? Dollar Tree's CEO, Gary Philbin, told me on Mad Money that his sourcing teams learned a long time ago not to be hostage to any one country, including China. He won't need to crash through the $1 barrier any time soon.
Same thing goes for Five Below (FIVE) . The stock itself is $12 below its $148 high, which sounds significant, but the stock is one of the best performers of the year -- up 33%. Five Below sources heavily in China, but it, too, is frantically moving away, although CEO Joel Anderson said that if it has to, it can take merchandise to $5.50 although, candidly, I couldn't tell if he were joking or not.
How about the industrials? When you consider where the percentage of growth is from for the major industrials, it's skewed to China. But Emerson (EMR) , which is the most linked to China, just reported an okay number and its stock barely got hit, and it's up 12% for the year. How about United Technologies (UTX) ? It's splitting into three different companies, one of them Otis, with its big growth totally skewed to China. The stock's up 28%.
Only 3M (MMM) , with a special niche China auto business, is really hurting, but there are so many things currently not going right there that it's hard to pin the tail on China.
We know that the packaged goods companies have long coveted China. The two best in terms of share? I would say Procter & Gamble (PG) and Estee Lauder (EL) , both of which had excellent China numbers. P&G's stock is up 13%; Estee Lauder's up 27%. Both are not too shabby and it isn't like they hide their China exposure.
Are we supposed to be shaking about Starbucks (SBUX) , with its number two market being China? I don't fret when a senior growth stock roars 20% in five months. People didn't like Nike's (NKE) last quarter, but it is still up 12%. That might be a candidate to be concerned about but the company has deep ties with the PRC.
What do you make of the disparity of the two Yums? I think it's incredible. Yum China's (YUMC) gone bonkers this year, up 33%. Regular Yum Brands (YUM) is just up 9%. I remember a Yum boycott back in the old days. Can it happen again? Possibly, but its stock reflects a free pass.
Transports? The one we know most levered to China is Union Pacific (UNP) with its big import exposure. Thanks to precision railroading, the stock's up 27%.
In fact, the only real tell of commercial worry is Fedex (FDX) which has spent a fortune building up its Chinese exposure. How much is it down for the year after a disappointing quarter? How about up 11%?
So what does that leave? How about ABC: Apple (AAPL) , Boeing (BA) and Caterpillar (CAT) . Apple's stock is one of the best tech performers this year, rallying 27%. Can you believe Boeing' stock is still 10% higher? Even Caterpillar's is still up 3%.
What do these stocks say? To me, they say something very clear: Our companies are ready. Our portfolio managers are ready. Only our economists and pundits seem to be worried about a pending crash that might never occur.