The bull market, which came into being in 2009, is widely expected to remain this year. This optimism largely stems from the Santa Claus rally, which is being felt way ahead of Christmas. This year’s holiday season started on a positive note as consumers have stepped up online purchases amid a strong economic backdrop.
Meanwhile, the United States and China’s 90-day trade tariff ceasefire soothed investors. Thus, it’s time to invest in stocks that are likely to make the most of the rosy picture.
December to be a Joy for Investors
Traditionally, the month of December has been the best for S&P 500 investors. From 1950, the S&P 500 Index has been up in 50 Decembers and down just 17 times, per Stock Trader’s Almanac. The Dow Jones Industrial Average was up 47 times and down 20 times, while the Nasdaq Composite, since its inception in 1971, was up 27 times and down 19 times. December, thus, turns out to be on an average the second best month for the tech-laden index. And when it comes to small caps, the Russell 2000 index has an even better reading. It’s been up 29 times and down only eight times.
This is entirely because of the Santa Claus Rally or the rise in prices in the final six days of the year. This term was first coined by market analyst Yale Hirsch in 1972 in The Stock Trader’s Almanac.
But, several market pundits have been using the term to refer to the period from the beginning of December, or even as early as Black Friday, to Christmas. And this time around, markets have gained on strong holiday sales and, there you have it, a Santa Claus rally. Consumers have also shown confidence in their financial future and are prepared to spend more. This is usually what triggers a Santa Claus rally.
Santa Claus Rally Drives Holiday Sales
Black Friday sales have been massive this year. Mastercard total spend for Black Friday (online and offline) was $23 billion, up nearly 9% from the day after Thanksgiving last year. Mastercard has projected a 5% rise in holiday sales from November 1 through Christmas Eve this year compared to last year.
Mastercard senior advisor Steve Sadove agreed that “both online and in-store sales are tracking very well.” Brian Field, senior director of global retail consulting for ShopperTrak, added that “the fact that the shopper visits remained almost the same this year compared to the last three years proves that the notion of Black Friday not being popular anymore is a myth and that retailers are in for a successful holiday season.”
Adobe Analytics that predominantly tracks digital sales further said that online purchases on Black Friday climbed 24% to $6.2 billion compared to last year. In fact, Cyber Monday sales this year soared to a record high, with $7.9 billion spent online that day, reflecting an increase of 19.3% from the year-ago level, according to data from Adobe Analytics.
Optimism Surges Over US-China Trade Truce
US-China trade truce, in the meantime, is a major policy change that will create big winners and help markets maintain the decade-long bull run.
Both President Trump and his Chinese counterpart Xi Jinping agreed to a trade deal last weekend. The United States won’t be imposing tariffs of 10% to 25% on $200 billion worth of Chinese goods for the time being, according to a White House statement. Meanwhile, China agreed to buy a “very substantial” amount of energy and agricultural goods from the United States to address the trade imbalance.
This is, undoubtedly, good news. After all, a potential trade war between the world’s two largest economies would have crippled the global economic growth and dented corporate profits.
5 Top Stocks for December
Courtesy of positive seasonal trend, solid holiday sales and US-China trade truce, we are lined up for a strong year-end rally. The U.S. economy, by the way, continues to expand at a steady 3% pace with record-low levels of unemployment.
Hence, it will be prudent to invest in five of the best stocks in the market that can make the most of this bullish trend. Such stocks have a Zacks Rank #1 (Strong Buy) and a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
Shoe Carnival, Inc. (SCVL - Free Report) operates as a family footwear retailer in the United States. In the last 60 days, one earnings estimate moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 10.2% in the same period. The stock’s estimated growth rate for the current year is 59.7% versus the Retail - Apparel and Shoes industry’s projected rally of 11.9%.
On Deck Capital, Inc. (ONDK - Free Report) operates an online platform for small business lending in the United States. In the last 60 days, five earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 20.5% in the same period. The stock’s estimated growth rate for the current year is more than 100% versus the Financial - Miscellaneous Services industry’s estimated rally of 11.3%.
DXP Enterprises, Inc. (DXPE - Free Report) engages in distributing maintenance, repair, and operating (MRO) products, equipment, and services to energy and industrial customers in the United States. In the last 60 days, one earnings estimate moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 13.3% in the same period. The stock’s estimated growth rate for the current year is 97.7% versus the Manufacturing - General Industrial industry’s projected rally of 18.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Coal, Inc. (ARCH - Free Report) produces and sells thermal and metallurgical coal from surface and underground mines. In the last 60 days, five earnings estimates moved up, while none moved down for the current year. The Zacks Consensus Estimate for earnings has risen 39.4% in the same period. The stock’s estimated growth rate for the current year is 32.5% versus the Mining - Miscellaneous industry’s expected rally of 8%.
Bristol-Myers Squibb Company (BMY - Free Report) discovers, develops, licenses, manufactures, markets, and distributes biopharmaceutical products worldwide. In the last 60 days, seven earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 6.6% in the same period. The stock’s estimated growth rate for the current year is 28.6% versus the Large Cap Pharmaceuticals industry’s projected rally of 9.4%.
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