Futures Now

Look for 'long-term winners' as China-led slowdown slams industrials: Analyst

Go for quality amid a China-driven 'structural slowdown,' says analyst

Global growth is getting gutted.

The ever-escalating trade war between the United States and China — which has weighed heavily on global markets amid tanking sentiment and corporations holding off on making key business decisions — has grown even more contentious. On Thursday, the Trump administration said it would put 10% tariffs on another $300 billion worth of Chinese goods come Sept. 1 amid stalled trade talks.

The move — one week after the International Monetary Fund cut its global growth forecast for the rest of 2019 — sent the U.S. major stock indexes into the red in a several-hundred-point intraday swing for the Dow Jones Industrial Average. Stocks continued their slide Friday despite a positive U.S. jobs report.

For some on Wall Street, this drop was a long time in the making.

"I think what investors are missing is that we are in the midst of a structural slowdown driven by what's really happening in China and has been happening since 2015," Andrew Obin, equity research analyst at Bank of America Merrill Lynch, told CNBC's "Futures Now" earlier this week.

"You should not miss the forest for the trees," he said. "Since 2015, China has been slowing. It's transitioning away from manufacturing and exports to internal consumption. A Chinese push to more government-oriented growth at the expense of private enterprise is having a detrimental impact on growth. So China is slowing, and frankly, our analyses of [capital expenditure] strength indicate that this is not going away."

Uncertainty around trade, tariffs and the excess inventory being built up amid the standoff, particularly among global manufacturing and industrial companies, is "exacerbating" the weakness, Obin said.

Factor in the "very anemic growth" in Europe, a large exporting market, "and you just don't have a lot of organic growth" to go around, the analyst said.

That's putting U.S. investors in a tough position as they consider where to put their money with more turmoil seemingly on the horizon.

"Most of the companies that I cover are missing top-line numbers," said Obin, whose analysis is focused on multiline industrial giants like General Electric.

"What's happening right now is comparable to what happened in the late '90s when Japan was slowing, and that dragged global [capital expenditures] below global [gross domestic product] for years, and we're seeing global capex now lagging GDP now for multiple years," Obin said. "In that environment, we think long-term winners are high-quality companies that are trading at high multiple[s] versus more cyclical names."

And, as markets turned on the tariff news, Obin only got more confident in his call.

"Our thesis of preference for higher quality stocks is predicated on the fact that there is a lot of volatility in the market, with the overall backdrop of structurally lower global growth," he wrote in an email to CNBC on Thursday. "The uncertainty created by the new tariffs further supports our framework."