The U.S. stock market has been combating deterrents like the U.S.-China trade dispute, multiple Fed rate hikes, global political spasms, volatile oil prices and others through 2018.
Things deteriorated at the tail end of the year, thanks to the latest Treasury yield anxiety and increase in federal funds rates. Not to forget, a rising interest rate environment reduces borrowing and eventually spending. If spending drops too much, there may be chances of a recession soon.
Now, as we gear up to ring in a New Year, investors might want to zero in on stocks that hold solid potential for a healthy ROI in 2019. But before that, let’s go through the noteworthy events of the year and then take a look at an elaborate outlook for 2019.
2018 in a Nutshell
The year 2018 has been quite a mixed bag for investors.
In the first half, the Trump administration announced the Tax Cuts and Jobs Act that provided a boost to cash flow and infused confidence for healthy investments.
As the year progressed, markets were stripped of the initial gains due to volatile oil prices, trade tiff, geopolitical conflict with North Korea and Iran, multiple interest hikes by Fed, imposition of tariffs on various foreign countries to improve the U.S. trade balance and a soft global economy.
In December, for the first time in more than a decade, yields on Treasuries with shorter maturities exceeded longer-dated issues. In other words, the yield curve experienced an inversion. Traditionally, such a phenomenon heralds severe economic downturn. Last time this happened in December 2007, just before the Great Recession.
However, we don’t see a near-term recession. This is because debt payments were way higher than household budgets during the Great Recession. Now, household debt payments account for a modest share of household income.
2019 Overall Forecast
Economy as a Whole
Fresh data from IMF shows that the economy will maintain a slow pace in 2019 and 2020. The GDP growth rate is expected to remain in the 2-3% ideal range. Meanwhile, unemployment is expected to continue at the usual rate.
Bloomberg forecasts United States’ net contribution to global GDP to drop from 12.3% to 8.5% in 2022.
Trade War Jibe to Relax Till March
The trade war jibe seems to settle down soon as Washington and Beijing have agreed to not levy further tariffs till March 2019. However, many experts believe that the mutually agreed timeframe is not enough to enable a comprehensive trade pact between the economies. The increase in tariff from 10% to 25% (on hold till Mar 1, 2019) on $200 billion worth of Chinese imports, if imposed, will have a significant impact on companies’ profits.
Fed Rate Hike Outlook
On Dec 19, policymakers announced the expectations of two more hikes in 2019. However, it did strike a dovish note by reducing projected rate hikes from three to two.
Oil Prices Outlook
Crude oil prices are recovering fast after plummeting to its lowest level of 2018 in November. According to market watchers, given OPEC’s recent decision of production cut with global oil demand remaining solid, there are high chances that crude prices will increase in 2019.
Any recovery in oil prices can play a major role in driving the broader stock market and of course small-cap stocks. Although it is not clear what 2019 will unfold for the markets, per Goldman Sachs, recent declines in oil price are likely to boost disposable income and in turn spending.
Time to Buy Momentum Stocks
With a favorable oil price trend, probabilities of just two Fed rate hikes and no recession in sight, let us focus on a few stocks that are likely help investors make the most.
However, picking the right momentum stocks is no mean feat for even the most seasoned investors, let alone new ones, who are planning to enter the uncharted world of jam-packed trades. With our Style Score System,we have singled out stocks which can help you beat the market. The Zacks Momentum Style Score indicates when the timing is best to pick a stock and advantage from its momentum.
Our research shows that stocks with a Momentum Score of A when combined with a Zacks Rank #1 (Strong Buy), offer the best upside potential in the short term. You can see the complete list of today’s Zacks #1 Rank stocks here.
We have listed below seven hot stocks sporting a Zacks Rank #1 and Momentum Score A.
Barclays PLC (BCS - Free Report) , a major global banking and financial services company, has market capitalization of roughly $32.25 billion.
The company has surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters. The bank's restructuring and business simplifying efforts (including ring-fencing) are expected to continue improving efficiency and profitability. While continuous pressure on revenue growth and Brexit-related ambiguity are worrisome, its efforts to manage costs are likely to support bottom-line growth. Further, the bank is on track to achieve its expense targets for 2018 and 2019.
The stock has a long-term expected earnings growth rate of 19.9%.
Canadian Solar Inc. (CSIQ - Free Report) , a vertically integrated manufacturer of silicon ingots, wafers, cells, solar modules (panels) and custom-designed solar power applications, has market capitalization of roughly $838.7 million.
The company caters to a geographically diverse customer base spread across both key markets and emerging markets. Of late, Canadian Solarhas further expanded its global late-stage project pipeline into nations like Argentina, Australia and South Korea, considering these to be markets for the next phase of industrial growth. Moreover, it has a strong pipeline of projects, and carries out various acquisitions and strategies to further consolidate its position.
The stock has a long-term expected earnings growth rate of 32%.
Telefonica Brasil S.A. (VIV - Free Report) , is the Brazilian subsidiary of Spanish telecom giant Telefonica SA. With the acquisition of Vivo, Telefonica Brasil became the largest telecom operator in Brazil in terms of revenues. The company has market capitalization of roughly $20.03 billion.
It is increasingly investing in technology upgrades and broadband network infrastructure expansion to retain competitiveness in a rapidly changing market. The company operates as the leading telephone operator in Brazil and continues to fortify its position in both data and post-paid segments. Also, Telefonica Brasil remains confident that its revenues will be driven by postpaid and IPTV growth, while its prepaid and fixed voice platforms are likely to benefit from an improving macroeconomic climate.
The stock has a long-term expected earnings growth rate of 10.4%.
Rockwell Medical, Inc. , a manufacturer of hemodialysis concentrates and dialysis kits, has a market capitalization of roughly $141.9 million.
The company is gaining prominence in the global renal space, particularly in North America, Latin America and Asia-Pacific. Rockwell Medical is also expected to gain from its Triferic platform — the only FDA-approved drug indicated to replace iron and maintain hemoglobin in hemodialysis patients suffering from anemia. In the first half of 2019, the company plans to launch its dialysates Triferic formulation in the United States.
NextEra Energy Partners, LP (NEP - Free Report) is a growth-oriented limited partnership formed by NextEra Energy, Inc. in 2014.
The company will gain from its decision to acquire 1,388-MW portfolio of wind and solar assets from NextEra Energy Resources. It enjoys the benefits of government initiatives to produce higher volume of electricity from clean sources. Its decision to sell the Canadian assets and focus on high quality domestic renewable assets is expected to be accretive to long-term goal.
The stock has a long-term expected earnings growth rate of 9%.
Belmond Ltd. (BEL - Free Report) has a collection of exceptional hotel and luxury travel adventures in some of the world's most inspiring and enriching destinations.
Management at Belmond claimed that the company has been acclaimed as one of the best luxury hotel brands in the world by the luxury hotel industry and Luxury Travel Intelligence.
The stock has a long-term expected earnings growth rate of 15%.
Shaw Communications Inc. (SJR - Free Report) is a diversified communications company that provides broadband cable television services, Internet, digital phone, telecommunications services, Direct-to-home (DTH) satellite services and satellite distribution services mainly in Canada and the United States.
The company continues to benefit from strong wireless business primarily owing to increase in subscriber base. Additionally, higher average revenue per unit (ARPU) is aiding the wireless growth. This momentum is expected to continue as the company may benefit from an increasing data-driven environment. Moreover, solid performance by the company’s wireless operations, which cover almost half of the Canadian population, is expected to boost the top line. We are also optimistic about Shaw Communications’ initiative to deploy 700 MHz and 2500 MHz spectrum, which might further improve network quality.
The stock has a long-term expected earnings growth rate of 5%.
In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?
These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >>