2019 turned out to be a banner year for the stock market, with the S&P 500, the Nasdaq and the Dow rising 28.9%, 35.2% and 22.3%, respectively. In fact, the S&P 500 index recorded its biggest December gain since 2010 and rallied 189.7% in the last 10 years.
Despite the protracted U.S.-China trade war weighing heavily on the U.S. economy, especially the manufacturing sector; the economy kept expanding last year. In fact, major benchmarks were also able to attain fresh all-time highs especially in the second half of last year, courtesy of the dovish Federal Reserve and healthy spending by American consumers.
Hurdles That Subdued Growth
The trade war that doomed stocks from improving in 2018, persisted in 2019. In fact, the United States’ blacklisting of Huawei Technologies and other Chinese companies, citing security concerns, aggravated the scenario, with China halting purchase of agricultural goods from American farms.
The U.S.-China trade war was primarily fought with tariff hikes. This weighed heavily on trade bellwethers, especially the chipmakers, which are highly susceptible to China. Companies like Caterpillar Inc. and Deere & Company faced the brunt of the trade war as increased tariffs hampered sales.
The headwinds from the U.S.-China trade war impacted the U.S. Manufacturing sector deeply by reducing employment and increasing the prices that manufacturers pay for required materials.
However, toward the end of the year, America halted the scheduled tariff hikes and, in turn, China promised to buy more agricultural products and establish stronger IP protections and toughen punishments for infringement. On Dec 31, President Trump announced that the United States and China will be signing the long awaited “Phase one” deal on Jan 15.
Catalyst That Fueled Stocks to Rally
The Federal Reserve had played a crucial role in saving the U.S. economy from plunging into recession. Post summer, the Fed grew concerned about the economic outlook and began easing its monetary policy to support economy and stimulate growth.
For July to October, the Fed kept slashing rates till both the economic giants got back to the negotiation table and agreed on a preliminary deal, resulting in abatement of recession fears. In fact, low interest rates helped stimulate the economy, as businesses could make the most of low cost of borrowing.
In fact, American consumers drove the economy. Consumer spending that makes up two-third of America’s economy helped the gross domestic product (GDP) grow at a pace of 2.1% (in the third quarter of 2019).
American consumers were buoyed by a nearly 50-year low unemployment rate and a substantial wage hike. According to the Bureau of Labor Statistics, unemployment rate fell to 3.5% in September, its lowest rate since May 1969.
The U.S. housing space got a boost from low-mortgage rate and a robust homebuilding market. Home Builder’s confidence had hit an all-time high in December jumping to 76 — highest level since June 1999. In fact, building permits for privately-owned houses had surged to a more than 12 year high, along with very encouraging housing starts and building permits data especially in second half of the year.
All these factors have helped the S&P 500 cross the coveted 3,000-point mark in July and the Nasdaq to cross the 9,000-point mark in Dec 26.
5 Stocks to Buy Now
With the United States and China finally making progress in easing the trade war and the Fed supporting growth by keeping rates unchanged in 2020, the U.S. equity market definitely has more room to run. Hence, we have shortlisted five stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
EverQuote, Inc. (EVER - Free Report) is an online marketplace for insurance shopping in the United States that offers auto, home, and life insurance quotes. The company’s expected earnings growth rate for 2020 is 88.9% compared with the Zacks Insurance - Multi line industry’s projected earnings growth of 10.4%.
The Zacks Consensus Estimate for the company’s current-year earnings has been revised nearly 37% upward over the past 60 days.EverQuote flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cassava Sciences, Inc. (SAVA - Free Report) is a clinical-stage drug development company that develops drugs for nervous system disorders. The company’s expected earnings growth rate for the current year is 47.5% compared with the Zacks Medical - Drugs industry’s projected earnings growth of 9.3%.
The Zacks Consensus Estimate for the company’s current-year earnings has been revised 28.9% upward over the past 60 days.Cassava Sciences flaunts a Zacks Rank #1.
Fulgent Genetics, Inc. (FLGT - Free Report) provides genetic testing services to physicians with clinically actionable diagnostic information. The company’s expected earnings growth rate for the current year is more than 100% compared with the Zacks Medical Info Systems industry’s projected earnings growth of 6.5%.
The Zacks Consensus Estimate for the company’s current-year earnings has been revised 80% upward over the past 60 days.Fulgent Genetics flaunts a Zacks Rank #1.
Teekay Tankers Ltd. (TNK - Free Report) provides marine transportation services to oil industries offering conventional tanker and ship-to-ship transfer facilities. The company’s expected earnings growth rate for the current year is more than 100% against the Zacks Transportation - Shipping industry’s projected earnings decline of 22.5%.
The Zacks Consensus Estimate for the company’s current-year earnings has been revised 61.7% upward over the past 60 days.Teekay Tankers carries a Zacks Rank #2.
Cue Biopharma, Inc. (CUE - Free Report) is a biopharmaceutical company that develops biologic drugs for the selective modulation of the human immune system to treat a range of cancers, chronic infectious diseases, and autoimmune disorders. The company’s expected earnings growth rate for the current year is 11.3% compared with the Zacks Medical - Biomedical and Genetics industry’s projected earnings growth of 6.7%.
The Zacks Consensus Estimate for the company’s current-year earnings has been revised 12.2% upward over the past 60 days.Cue Biopharma flaunts a Zacks Rank #1.
Shares of EverQuote, Cassava Sciences, Fulgent Genetics, Teekay Tankers and Cue Biopharma had gained 678.9%, 465.5%, 265.4%, 201.7% and 187.6%, respectively, over the past one-year period.
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