According to some traders, it may be time to China-proof your portfolio.
The Shanghai composite index has been on a bumpy ride. On Wednesday, stocks closed up 1.2 percent following a volatile trading day and a Tuesday sell-off of more than 6 percent. And the roller coaster has one trader warning of more downside for Chinese markets, which could lead to pain for several U.S. stocks.
"We believe that the China slowdown will have an impact not only within the oil price, but also base metals," said Chad Morganlander, portfolio manager at Stifel Nicolaus. "We would be very cautious at this juncture."
On Wednesday, the Commerce Ministry said China's exports could see further declines, following an 8.3 percent drop in July.
To avoid further blows from falling oil and commodities prices, Morganlander recommends staying away from Chevron and Exxon Mobil. Exxon Mobil has fallen more than 15 percent this year, and Chevron has plummeted almost 26 percent year to date.
Morganlander said he believes China's GDP growth rate is about 4 to 5 percent, lower than the 7 percent rate that China reported. He said the growth rate will continue to fall, possibly dragging oil prices down into the $20 to $30 level.
Crude oil has fallen more than 20 percent year to date.
Instead, Morganlander suggests investing in consumer staples and consumer discretionary stocks such as Hershey, Pepsi and Dr Pepper Snapple, because he sees them as high-quality stocks that won't be affected by problems overseas.
Rich Ross, technical analyst at Evercore ISI, is also bullish on Dr Pepper, whose business he said is boosted by a stronger U.S. dollar. The company is up 36 percent this year, and closed at an all-time high in early August.
"I do share concerns about the emerging markets and global growth with those currencies and economies clearly collapsing here in the short-term," Ross said. "Where you want to be is focused on U.S. risk."
Companies like Dr Pepper get most of their revenue domestically, and are less susceptible to international influence, said Ross.
"All of these macro forces which are weighing on the rest of the world are actually tailwinds for staples like [Dr Pepper]," Ross said.
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