Benchmarks logged strong February gains, with the S&P 500 gaining 3% and the Dow rallying 3.7%. All the indexes, in fact, rose for the second month in a row. In fact, the S&P 500 and Dow advanced more than 7% in January, registering their biggest gains since January 1987 and January 1989, respectively. This was indeed an amazing recovery considering that December was one of the worst months for stocks in almost 90 years.
History, in fact, suggests that markets usually continue to rise in the days to come where the first two months of the year were positive, according to research by LPL Financial. Ryan Detrick, Senior Market Strategist for LPL said that “since 1950, the S&P 500 has kicked off the year higher each of the first two months 27 times… incredibly, the final 10 months finished higher 25 of those times!”
But, skeptics think that the stock market in March may face a bumpy ride, thanks to Brexit. U.K. Prime Minister Theresa May, who initially voted against Brexit, had to change her course to support the desire of the voters. However, a strong domestic economy should certainly provide momentum to stocks in March.
Sturdy U.S. Economy
The United States expanded at a 2.6% annual pace in the fourth quarter of 2018. This is way higher than analysts’ expectations of 1.9% growth rate. Actually, GDP for the full year matched the growth rate attained in 2015, which was the highest since the 2007-2009 Great Recession.
Pick-up in consumer spending and an uptick in business investment in software, research and equipment boosted economic growth. Consumer outlays in particular improved on a steady job market and healthier household finances. The Bureau of Labor Statistics added that employment gains in 2018 turned out to be the strongest in the last three years. In fact, if we consider December’s job additions of 222,000, November’s 196,000 and January’s 304,000, the labor market has posted the best three-month stretch during an economic expansion dating back nine-and-a-half years.
Americans have also regained confidence on their economy. Consumers’ assessment of current conditions improved and expectations about the future strengthened, indicating sturdy economic growth.
According to the Conference Board, the consumer confidence index climbed to 131.4 in February from a revised 121.7 in January. The key economic indicator that measures attitudes on future economic prospects exceeded analysts’ expectations of a 124.7 reading and has rebounded after three straight months of a decline. People’s confidence in the present situation improved from 170.2 last month to 173.5 in February, which is an 18-year high. The future expectations index also increased from 89.4 to 103.4, the largest monthly gain since 2011.
U.S.-China Trade Negotiations, Accommodative Fed
Investors are also spurred by positive news related to trade war and the Fed policy. Trump has acknowledged that the deadline to impose tariffs on $200 billion worth of Chinese goods would be pushed back as negotiations continue to be fruitful between the United States and China. Such a positive development, no doubt, should encourage Wall Street. After all, several companies have been raising their concerns that the trade war has been affecting revenues and costing them money.
The Fed’s latest comment that the rate increases are on a pause is of utmost significance. The Fed confirmed that it would be “patient” with future rate hikes this year. This dovish stance will certainly help the broader market chug along in the near term. And why not? Hike in rates increases the cost of lending money from financial institutions for small and medium business houses. This in turn could harm the U.S. economy.
5 Top Stocks to Own in March
Courtesy of a dovish Fed, optimism that U.S.-China trade deal might be in the cards and solid state of the domestic economy, we are lined up for a strong March. Thus, it will be prudent to invest in five of the best stocks that can make the most of the bullish trend. These stocks have a Zacks Rank #1 (Strong Buy) and a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Digital Turbine, Inc. (APPS - Free Report) provides media and mobile communication solutions for mobile operators, application developers, device original equipment manufacturers, and other third parties. The Zacks Consensus Estimate for current-year earnings has moved up 75% in the past 60 days. The company’s expected earnings growth rate for the current quarter is 300%, way more than the Internet - Software industry’s projected gain of 83.8%.
Boot Barn Holdings, Inc. (BOOT - Free Report) operates specialty retail stores in the United States. The Zacks Consensus Estimate for current-year earnings has moved 6.4% north in the past 60 days. The company’s expected earnings growth rate for the current year is 90%, way higher than the Retail - Apparel and Shoes industry’s estimated gain of 10.6%.
Fortinet, Inc. (FTNT - Free Report) provides broad, automated, and integrated cybersecurity solutions. The Zacks Consensus Estimate for current-year earnings has risen 4% in the past 60 days. The company’s expected earnings growth rate for the current year is 12.5%, more than the Security industry’s expected gain of 2.1%.
Rent-A-Center, Inc. (RCII - Free Report) leases household durable goods to customers on a rent-to-own basis. The Zacks Consensus Estimate for current-year earnings has moved up 2.2% in the past 60 days. The company’s expected earnings growth rate for the current year is 270.4%, more than the Consumer Services - Miscellaneous industry’s projected gain of 14.1%.
Spirit AeroSystems Holdings, Inc. (SPR - Free Report) designs, manufactures, and supplies commercial aero structures. The Zacks Consensus Estimate for current-year earnings has moved up 2.5% in the past 60 days. The company’s expected earnings growth rate for the current year is 19.3%, more than the Aerospace - Defense Equipment industry’s projected gain of 11.1%.
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