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5 Stocks to Gain as Fed Chair "Blinks" on Rates

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On Nov 29, Fed Chair Jerome Powell’s comments helped the Dow post its largest one-day gains in eight months. Powell unequivocally stated that rates were close to neutral, a clear departure from comments made two months ago. On that occasion, his statements had sent the S&P 500 into correction mode.

But now Jerome Powell has indicated that the Fed may be at the end of its three-year tightening cycle. This is in keeping with market expectations and addresses President Trump’s repeated criticism of the Fed Chair’s stance on rates.

With trade tensions also likely to be addressed over the weekend, markets are likely to shrug the volatility which has gripped stocks in recent times. Investors would now best prepare for sunnier days ahead, which make it imperative to pick select growth stocks.

Powell “Blinks” on Rates

Speaking at The Economic Club of New York, Powell said that interest rates are still at historical lows. At the same time, they are currently only a shade below “the level that would be neutral for the economy.” His closely watched speech was a clear departure from comments made around two months ago.

Powell’s speech was in consonance with comments made by Fed Vice Chair Richard Clarida on Nov 27. Underlining the importance of a data-dependent approach to monetary policy, Clarida said interest rates were “much closer” to a neutral level.

On that occasion, the Fed Chair had said that rates were a “long way from neutral.” Following his remarks, the S&P 500 entered correction mode. Subsequently, his stance on rates has come in for sharp criticism from President Trump. On Nov 27, Trump said that he was “not even a little bit happy” with his choice of Powell as Fed Chair.

Commenting on Powell’s change in stance, CNBC’s Jim Cramer tweeted that the Fed Chair had “blinked” on rates. “Powell sees the global slowdown and knows that it could hurt us,” tweeted Cramer, attributing the change in stance to this factor.

Trade Tensions Likely to be Addressed, GDP Robust

Meanwhile, The New York Times has reported that President Trump is concerned about the impact of lingering trade tensions with China on equity markets and the economy. This could lead to the President seeking a compromise on trade on the sidelines of the G-20 summit starting in Argentina this weekend.

This is clear divergence from Trump’s recent stance on trade relations with China. In fact, they are more in keeping with recent comments from U.S. National Economic Council Director Larry Kudlow. On Nov 27, Kudlow said the U.S. government has reopened negotiations on trade issues with China at several high-powered levels.

Additionally, the economy remains robust as can be gleaned from the latest GDP numbers. The Department of Commerce’s second estimate kept third-quarter GDP unrevised at a 3.5% pace. A spike in inventories and business investment has been the primary catalyst to the strong pace of growth witnessed during the quarter.    

Our Choices

Powell’s change in stance comes as a welcome surprise for markets which have been weighed down by fears about a tougher rate environment. Meanwhile, a trade deal between the United States and China is likely to be worked out on the sidelines of the G-20 summit this weekend.

With most lingering concerns likely to be addressed shortly, markets are all set to resume their long-standing rally. At this stage, investment in stocks with strong growth potential will be lucrative. Our selection is backed by a Zacks Growth Score of A and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Our research shows that stocks with a Growth Style Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best opportunities in the Growth-investing space. We have handpicked five such stocks with a Zacks Rank #1 and Growth Style Score of A.

DexCom, Inc. (DXCM - Free Report) is a medical device company focused on the design, development and commercialization of continuous glucose monitoring systems. 

DexCom has expected earnings growth of 79.8% for the current year. The Zacks Consensus Estimate for the current year has improved by 75% over the last 30 days.

The Mosaic Company (MOS - Free Report) is a leading producer and marketer of concentrated phosphate and potash for the global agriculture industry.

The Mosaic Company has expected earnings growth of 71.9% for the current year. The Zacks Consensus Estimate for the current year has improved by 9.2% over the last 30 days.

Amedisys, Inc. (AMED - Free Report) provides home health and hospice services throughout the U.S. to the growing chronic, co-morbid, and aging American population.

Amedisys has expected earnings growth of 62% for the current year. The Zacks Consensus Estimate for the current year has improved by 5.6% over the last 30 days.

Genomic Health, Inc. (GHDX - Free Report) is a global cancer company with a focus on advanced molecular diagnostics.

Genomic Health’s expected earnings growth for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 96.7% over the last 30 days.

Fossil Group, Inc. (FOSL - Free Report) is a designer and manufacturer of clothing and accessories.

Fossil Group’s expected earnings growth for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 32.9% over the last 30 days.

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