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4 Solid S&P 500 Stocks to Bet on as Index Hits All-Time High
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Wall Street showed volatility to start the New Year. However, stocks have since then rebounded and three major indexes officially entered the bull market last week, with the S&P 500 Index hitting an all-time high. The S&P 500 closed at 4,839.81 points on Friday to record its highest close since January 2022.
Wall Street had a solid 2023 after a disappointing 2022 as 40-year-high inflation took a toll on stocks and the Federal Reserve implemented an aggressive interest rate hike policy to normalize the situation. This saw the S&P 500 giving up 19% in 2022.
The high interest rate regime continued in 2023 but markets rebounded as inflation started showing signs of easing. The Fed left interest rates unchanged for the first time in July last year before keeping it steady in its last three FOMC meetings after hiking rates by 525 basis points.
Slowing inflation and a dovish stance from the Federal Reserve sent stocks on a year-end rally that saw the S&P 500 recording a 24% gain in 2023 as fears of a recession waned.
S&P to Rally in 2024
Economists now expect that the economy will make a softer landing as inflation has eased considerably. The Federal Reserve has also hinted at cutting interest rates this year. Although the optimism among investors about the first interest rate cut coming in March has somewhat wanted, rate cuts are happening for sure in 2024.
According to the CME FedWatch Tool, 47.2% feel that a 25-basis point rate cut is possible in March. This was, however, more than 90% at the beginning of this year. Several Fed officials have indicated at least three 25-basis point rate cuts in 2024.
Lower interest rates bode well for stock markets. A low risk-free interest rate will bring down the discount rate, leading to an increase in the net present value of investments in equities.
Also, the economy is on solid ground. The third-quarter GDP grew 4.9% and according to the Atlanta Fed, the nation’s GDP is projected to grow 2.4% in the fourth quarter of 2023.
Our Choices
Given this scenario, it would be ideal to invest in four S&P 500 stocks such as American Water Works Company, Inc. (AWK - Free Report) , NVIDIA Corporation (NVDA - Free Report) , A. O. Smith Corporation (AOS - Free Report) and Arista Networks, Inc. (ANET - Free Report) thathave a strong potential in 2024. These stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and assure good returns. You can see the complete list of today’s Zacks #1 Rank stocks here.
American Water Works Company, Inc. provides essential water services to over 14 million customers in 24 states and has an employee strength of 6,500. AWK also acquires small water service providers to expand its customer base.
American Water Works Company has an expected earnings growth rate of 7.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days. AWK presently carries a Zacks Rank #2.
NVIDIA Corporation is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. Over the years, NVDA’s focus has evolved from PC graphics to artificial intelligence-based solutions that now support high-performance computing, gaming and virtual reality platforms.
NVIDIA has an expected earnings growth rate of 268.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 12.9% over the last 60 days. NVDA presently sports a Zacks Rank #1.
A. O. Smith Corporation is one of the leading manufacturers of commercial and residential water heating equipment and water treatment products in the world. AOS specializes in offering innovative and energy-efficient solutions and products, which are developed and sold on a global platform.
A. O. Smith’s expected earnings growth for the current year is 20.7%. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. AOS currently carries a Zacks Rank #2.
Arista Networks, Inc. is engaged in providing cloud networking solutions for data centers and cloud computing environments. ANET offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.
Arista Networks expected earnings growth for the current year is 43%. The Zacks Consensus Estimate for current-year earnings has improved 6.2% over the last 60 days. ANET currently carries a Zacks Rank #2.
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4 Solid S&P 500 Stocks to Bet on as Index Hits All-Time High
Wall Street showed volatility to start the New Year. However, stocks have since then rebounded and three major indexes officially entered the bull market last week, with the S&P 500 Index hitting an all-time high. The S&P 500 closed at 4,839.81 points on Friday to record its highest close since January 2022.
Wall Street had a solid 2023 after a disappointing 2022 as 40-year-high inflation took a toll on stocks and the Federal Reserve implemented an aggressive interest rate hike policy to normalize the situation. This saw the S&P 500 giving up 19% in 2022.
The high interest rate regime continued in 2023 but markets rebounded as inflation started showing signs of easing. The Fed left interest rates unchanged for the first time in July last year before keeping it steady in its last three FOMC meetings after hiking rates by 525 basis points.
Slowing inflation and a dovish stance from the Federal Reserve sent stocks on a year-end rally that saw the S&P 500 recording a 24% gain in 2023 as fears of a recession waned.
S&P to Rally in 2024
Economists now expect that the economy will make a softer landing as inflation has eased considerably. The Federal Reserve has also hinted at cutting interest rates this year. Although the optimism among investors about the first interest rate cut coming in March has somewhat wanted, rate cuts are happening for sure in 2024.
According to the CME FedWatch Tool, 47.2% feel that a 25-basis point rate cut is possible in March. This was, however, more than 90% at the beginning of this year. Several Fed officials have indicated at least three 25-basis point rate cuts in 2024.
Lower interest rates bode well for stock markets. A low risk-free interest rate will bring down the discount rate, leading to an increase in the net present value of investments in equities.
Also, the economy is on solid ground. The third-quarter GDP grew 4.9% and according to the Atlanta Fed, the nation’s GDP is projected to grow 2.4% in the fourth quarter of 2023.
Our Choices
Given this scenario, it would be ideal to invest in four S&P 500 stocks such as American Water Works Company, Inc. (AWK - Free Report) , NVIDIA Corporation (NVDA - Free Report) , A. O. Smith Corporation (AOS - Free Report) and Arista Networks, Inc. (ANET - Free Report) thathave a strong potential in 2024. These stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and assure good returns. You can see the complete list of today’s Zacks #1 Rank stocks here.
American Water Works Company, Inc. provides essential water services to over 14 million customers in 24 states and has an employee strength of 6,500. AWK also acquires small water service providers to expand its customer base.
American Water Works Company has an expected earnings growth rate of 7.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days. AWK presently carries a Zacks Rank #2.
NVIDIA Corporation is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. Over the years, NVDA’s focus has evolved from PC graphics to artificial intelligence-based solutions that now support high-performance computing, gaming and virtual reality platforms.
NVIDIA has an expected earnings growth rate of 268.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 12.9% over the last 60 days. NVDA presently sports a Zacks Rank #1.
A. O. Smith Corporation is one of the leading manufacturers of commercial and residential water heating equipment and water treatment products in the world. AOS specializes in offering innovative and energy-efficient solutions and products, which are developed and sold on a global platform.
A. O. Smith’s expected earnings growth for the current year is 20.7%. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. AOS currently carries a Zacks Rank #2.
Arista Networks, Inc. is engaged in providing cloud networking solutions for data centers and cloud computing environments. ANET offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.
Arista Networks expected earnings growth for the current year is 43%. The Zacks Consensus Estimate for current-year earnings has improved 6.2% over the last 60 days. ANET currently carries a Zacks Rank #2.