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Wall Street Sees Second-Best Election Day Rally: What's Next?

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All three major U.S. bourses fell sharply last week, registering the first back-to-back monthly drop since March. The primary reason for this is investors’ anticipation of a highly-contested election, with no winner emerging soon.
 
What’s more, a contested election generally leads to court cases since no party accepts defeat, resulting in severe market volatility. And how can we forget that the United States is grappling with a fresh spike in coronavirus cases that could easily bring about new lockdown measures.
 
However, as tens of millions of Americans headed to the polls yesterday, optimism grew about a clear winner. In the national polls, Democrat’s Joe Biden’s lead over Republican President Trump gave some clarity about an outcome and what major policy shifts can be expected from a blue wave.
 
Optimism about an uncontested winner did help the U.S. stock market notch its second-best election day rally on Nov 3, with the Dow climbing 554.98 points, or 2.1% to 27480.03, marking its biggest one-day point as well as one-day percentage jump since Jul 14.
 
The broader S&P 500 and the tech-laden Nasdaq also gained 1.2% and 0.4%, respectively. Remarkably, many investors were hopeful about early results as majority of votes have already been cast by mail due to the coronavirus outbreak.
 
But hopes of a possible Democratic sweep diminished today as the race for the White House became tantalizingly close with Trump winning Florida and competition intensifying in the swing states. And with no clear winner in sight, chances are that the stock market may face wild swings, at least in the near term.
 
But do we really expect market gyration to continue for a pretty long period once the results are declared? Certainly not! Election-led volatility will fade once it is in rear-view. And whichever party wins the election, it will swiftly implement its policies, which in one way or the other benefit the broader economy vis-à-vis the stock market. This is because both parties have assured to come up with additional coronavirus relief packages, and once those get implemented, the stock market should scale north.
 
Biden, in particular, has called for infrastructural push, which certainly boosts the economy and improves employment. Biden has also promised to de-escalate trade tensions with China, a tell-tale sign that exporters will benefit from this move.
 
Conversely, if Trump is re-elected, he will continue with his tax cut program. He will also put significant pressure on the Fed to keep rates low, which will bring down the cost of borrowing, improve disposable income, increase consumer outlays and pep up the economy.
 
Talking about the economy, let’s admit, it’s still doing well amid the pandemic. That raises hopes that markets will continue to chug along in the long run and shrug off any election-led momentary hiccups. 
 
Manufacturing activities picked up more than expected last month, with service sector activity rising above pre-pandemic levels in September. U.S. consumers also continue to remain confident about their well-being and present labor market conditions.
 
Thus, it’s imperative for investors to stay invested in the markets, ignore immediate election-led volatility and be optimistic since the future of the stock market looks bright no matter who wins the election. Hence, investing in growth stocks poised to generate healthy returns shouldn’t be a bad proposition.

5 Top Choices

Thanks to our style score system we have been able to identify five growth stocks. Our research shows that stocks with a Growth Score of A or B when combined a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best opportunities in the growth investing space.
 
Aarons, Inc. (AAN - Free Report) is a major omni-channel provider of lease-purchase solutions. The company currently has a Zacks Rank #1 and a Growth Score of A. The Zacks Consensus Estimate for its current-year earnings has moved up 26.3% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 12.2% and 28.5%, respectively.
 
Box, Inc. (BOX - Free Report) is a provider of a cloud content management platform. The company currently has a Zacks Rank #2 and a Growth Score of B. The Zacks Consensus Estimate for its current-year earnings has climbed 1.8% over the past 60 days. The company’s expected earnings growth rate for the current and next year is more than 100% and 20.7%, respectively.
 
Beazer Homes USA, Inc. (BZH - Free Report) designs, builds and sells single family homes. The company, currently, has a Zacks Rank #1 and a Growth Score of A. The Zacks Consensus Estimate for its current year earnings increased 8.5% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 20.5% and 4.6%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.
 
CAI International, Inc. (CAI - Free Report) operates as transportation finance and logistics company. The company currently has a Zacks Rank #2 and a Growth Score of B. The Zacks Consensus Estimate for its current-quarter earnings has moved 75.5% north over the past 90 days. The company’s expected earnings growth rate for the current and next year is 38.5% and 42.3%, respectively.
 
Brown Brown, Inc. (BRO - Free Report) markets and sells insurance products and services primarily in the United States. The company currently has a Zacks Rank #1 and a Growth Score of B. The Zacks Consensus Estimate for its current-year earnings has climbed 6.5% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 16.4% and 4.9%, respectively.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
 
With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan. 
 
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.