U.S. stocks have been booming this year with major bourses skyrocketing to new peaks. This is primarily thanks to the reopening of businesses and economies, the largest vaccination drive, an unprecedent stimulus, a huge infrastructure package, resumption of earnings growth and a healing job market. However, inflation fears, the resurgence in COVID-19 cases, taper talks, the potential for high corporate tax rates and signs of slowdown in China’s economy have kept the stock market edgy throughout the year.
With a few trading sessions left to end the first nine months of 2021, the S&P 500 is up about 18.3% while the Dow Jones and the Nasdaq have gained 13.9% and 16.1%, respectively. Below we discuss some of the hot events of the first nine months of this year and influenced the market in a big way: Fed Tapering Signals
In the FOMC meeting that concluded on Sep 22, the Federal Reserve Chair Jerome Powell kept the interest rates near zero at 0-0.25% but signaled bond-buying tapering ahead followed by interest rate hikes as early as next year.
The central bank is expected to begin scaling back the monthly bond purchases as soon as November and complete the process by mid-2022. This is because it expects the Delta variant of the coronavirus, which has dented economic activity in the recent months, to have a short-lived effect on the recovery. Per the officials, the economy will likely make “substantial further progress” by the end of the year, a threshold needed for the central bank to begin slowing the pace of asset purchases The financial sector seems to be the biggest beneficiary of the Fed’s move. This is because the steepening yield curve would bolster profits for banks, insurance companies, and discount brokerage firms. Some of the top ranked stocks like First American Financial Corporation ( FAF Quick Quote FAF - Free Report) , StepStone Group Inc. ( STEP Quick Quote STEP - Free Report) and Lincoln National Corporation ( LNC Quick Quote LNC - Free Report) ae great choices to play this trend. These stocks have a solid Zacks Rank #1 (Strong Buy) or 2 (Buy), suggesting their outperformance in the months ahead. You can see . the complete list of today’s Zacks #1 Rank stocks here Further, these stocks are expected to generate solid earnings growth in the current fiscal year (FAF – 28.3%, STEP – 42.5%, and LNC – 131.2%). Delta Variant of COVID-19
The Delta variant of COVID-19 has kept investors jittery for most of this year. The rising number of cases, especially in the unvaccinated or under-vaccinated areas, has led to renewed restriction measures. This has resulted in continued acceleration in the digital shift, driving the e-commerce boom.
Given this, investors could bet on the flourishing trend with the top-ranked stock in this space. MercadoLibre Inc. (has a Zacks Rank #1 and Growth Score of A. With a market cap of $92.9 billion, it is one of the largest e-commerce platforms in Latin America. The company’s earnings are estimated to grow to $2.74 per share this year from a loss of 8 cents reported last year. MELI Quick Quote MELI - Free Report) Biggest Vaccination Drive
The biggest vaccination rollout in history is underway. As of Sep 22,
about 77% of the adult population in the United States has received at least one dose of a COVID-19 vaccine. According to the U.S. Centers for Disease Control and Prevention (CDC), more than 64% of the total population has received at least one dose of a COVID-19 vaccine and about 55% is fully vaccinated. In the latest development, the FDA granted the first full Pfizer (PFE)-BioNTech COVID-19 vaccine and the emergency use of a booster dose that will help put brakes on the ongoing surge in the COVID-19 Delta variant cases and lead to continued reopening of the economy. As the cyclical sectors are tied to economic activities, these outperform when economic growth improves. In particular, airlines, hotels, casino operators, travel, and entertainment-booking companies will benefit the most. Some of the top-ranked stocks from these spaces include Boyd Gaming Corporation (, BYD Quick Quote BYD - Free Report) Hub Group Inc. (and HUBG Quick Quote HUBG - Free Report) SeaWorld Entertainment Inc. (. These stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and are expected to generate solid earnings growth in the current fiscal year (BYD – 3220%, HUBG – 67.1%, and SEAS– 176.4%). These stocks are in green over the past three months despite a series of sell-offs. SEAS Quick Quote SEAS - Free Report) Stimulus and Infrastructure Plan
Biden signed the $1.9 trillion coronavirus stimulus bill in March. The package includes another round of $1,400 stimulus checks, $350 billion in state and local aid, $25 billion in rental and utility assistance, and enhanced federal unemployment benefits. On Aug 10, the Senate had passed a $1 trillion infrastructure bill, which would be one of the most substantial federal investment in roads, bridges and rails in decades. The bill, which includes $550 billion in new spending on roads, bridges, and Internet access, is still awaiting the approval from the House of Representatives.
These stimulus packages have been bolstering investors’ confidence in the economy. While there are several top-ranked stocks that investors could bet on to tap the booming economy, small caps seem to be the best choice as these are more domestically focused and outperform when the economy improves. BuildABear Workshop Inc. ( has soared about 553% so far this year and is expected to rise further with estimated earnings growth of 256.3% for the current fiscal year. It carries a Zacks Rank #1 and a VGM Score of B. BBW Quick Quote BBW - Free Report) Energy Sector: A Hot Spot
Brent jumped above $80 per barrel for the first time in around three years while WTI climbed to above $75 per barrel — the highest since July. The rally has been driven by supply shortages and growing demand with the easing of pandemic restrictions. Overall demand for fuel has rebounded to the pre-pandemic levels. Driven by an oil surge, energy has been the best performing sectors of this year.
Goodrich Petroleum Corporation has more than doubled this year and has a Zacks ETF Rank #1 (Strong Buy) and a VGM Score of A. Its earnings are estimated to grow to $3.73 per share for this year from 21 cents reported last year.