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Forget Inflation, Enjoy Markets' Bull Run With Top 5 Picks

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Wall Street is firing on all cylinders and has almost recouped the losses that it suffered last week following a massive jump in Fed's projection for inflation in 2021 and its signal for a sooner-than-expected rate hike.

A series of strong economic data, an agreement between the Biden administration and a bipartisan group of senators regarding a new infrastructure development plan and Fed Chairman Jerome Powell's repeated assertion that the ongoing inflation is transitory have helped the bulls to roar again.

On Jun 24, the market's benchmark S&P 500 Index attained a fresh all-time high after Jun 15. The teach-heavy Nasdaq Composite has been recording new all-time highs in the last three trading sessions. The Dow is around 2.6% away from its all-time high posted on May 10.  

Strong Economic Data and Projections

On Jun 24, the Bureau of Economic Analysis confirmed in its third estimate that the U.S. economy grew at 6.4% in first-quarter 2021. In its latest projection on Jun 24, the Atlanta Fed expects GDP to grow by 9.7% in the second quarter. On Jun 16, the Fed raised its GDP growth projection for 2021 to 7% from 6.5% estimated in March.

The U.S. labor market is settling down gradually. On Jun 24, the Department of Labor reported that weekly jobless claims declined to 411,000 for the week ended Jun 19 compared with an upwardly revised 418,000 in the previous week. The continuing claims (people who have already received government aids) fell 144,000 to 3.39 million for the week ended Jun 12.  

Moreover, the Department of Commerce reported that durable goods orders — a major indicator for the manufacturing sector trends — jumped 2.3% in May from a downwardly revised decline of 0.8% in April.

After the closing bell on Jun 24, the Fed declared results of its latest stress test in which all 23 major financial lenders easily cleared the central bank's capital requirement threshold. This means that the Fed believes these banks have enough capital to survive any hypothetical economic downturn. Consequently, the KBW Nasdaq Bank Index (BKX) surged 1.5%.

Biden's Infrastructure Plan

On Jun 24, the White House reached a deal with a core bipartisan group of 10 senators regarding an infrastructure development plan to spend around $973 billion over five years. Total spending may go up to $1.2 trillion if the plan is extended to eight years. Segments like basic materials, industrials, communication infrastructure developers and utilities will benefit immensely along with more job creation for the economy.

The plan includes nearly $400 billion in baseline transportation funding that Congress must regularly renew. The size of the new expenditure will be $579 billion. Of this, $312 billion will go to transportation including roads and bridges, railroads and public transit.

Moreover, $15 billion will go toward electric vehicle infrastructure and electric buses and transit. The plan allocates $266 billion into non-transportation infrastructure including power, water and broadband.

Our Top Picks

We have narrowed down our search to five stocks that are likely to gain from the newly proposed infrastructure development plan. These stocks have strong potential for 2021 and witnessed solid earnings estimate revisions within the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The chart below shows the price performance of our five picks year to date.

Zacks Investment ResearchImage Source: Zacks Investment Research

Caterpillar Inc. (CAT - Free Report) manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives worldwide.

This Zacks Rank #2 company has an expected earnings growth rate of 46.3% for the current year. The Zacks Consensus Estimate for the current year has improved 0.6% over the last 30 days. The stock price has rallied 20.5% year to date.

Nucor Corp. (NUE - Free Report) is a leading producer of structural steel, steel bars, steel joists, steel deck and cold-finished bars in the United States. It operates through three segments: Steel Mills, Steel Products, and Raw Materials.

This Zacks Rank #1 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 35.1% over the last 30 days. The stock price has soared 84% year to date.

ADTRAN Inc. (ADTN - Free Report) provides networking and communications platforms and services for service providers, cable/multiple system operators, small- to medium-sized business, and distributed enterprises in the United States, Germany, Mexico, and internationally. It operates through two segments, Network Solutions, and Services & Support.

This Zacks Rank #2 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 30% over the last 60 days. The stock price has jumped 42.4% year to date.

Emerson Electric Co. (EMR - Free Report) designs and manufactures technology and engineering products for industrial, commercial, and consumer markets worldwide. It operates through the Automation Solutions, and Commercial & Residential Solutions segments.

This Zacks Rank #2 company has an expected earnings growth rate of 13.6% for the current year (ending September 2021). The Zacks Consensus Estimate for the current year has improved 1% over the last 30 days. The stock price has surged 18.6% year to date.

Jacobs Engineering Group Inc. (J - Free Report) provides consulting, technical, scientific and project delivery services for the government and private sectors in the United States, Europe, Canada, India, rest of Asia, Australia, New Zealand, South America, Mexico, the Middle East, and Africa. It operates in two segments, Critical Mission Solutions and People & Places Solutions.

This Zacks Rank #2 company has an expected earnings growth rate of 11.7% for the current year (ending September 2021). The Zacks Consensus Estimate for the current year has improved 5.2% over the last 30 days. The stock price has climbed 24.1% year to date.

Infrastructure Stock Boom to Sweep America

A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.

The only question is “Will you get into the right stocks early when their growth potential is greatest?”

Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.

Download FREE: How to Profit from Trillions on Spending for Infrastructure >>