Wall Street bulls are raging since the beginning of this year, breaking one record after another. The S&P 500 Index, generally considered as the barometer of market sentiment within the financial circle, reached a milestone on Jan 16 after closing, above the technical threshold of 3,300 for the first time.
S&P 500 Firing on All Cylinders
The S&P 500 Index rallied 28.9% in 2019, which was a complete reversal of its pathetic performance in 2018 when it had plunged 6.2%. The benchmark index’s gain last year was the second highest (barring 29.6% gain in 2013) since 1997, when the index had jumped 31%. In 2019, the index achieved a major milestone after closing above a key psychological barrier of 3,000 for the first time on Jul 12.
The broad-market index has maintained last year’s momentum since the beginning of 2020. Year to date, it has gained nearly 2.7%. On Jan 17, it ended above 3,300 for the first time. This means the S&P 500 has rallied 10% in the past six months.
On Jan 17, the S&P 500 closed at 3,316.81, well above its 50-day and 200-day moving averages of 3,172.23 and 2,991.99, respectively. In financial literature, the 50-day moving average line is generally recognized as the short-term trend setter, while the 200-day moving average is considered as the long-term trend setter.
It is widely believed in the technical analysis space that whenever the 50-day moving average line surges ahead of the 200-day moving average line, a long-term uptrend for the index becomes a strong possibility.
Will S&P 500’s Bull Run Continue?
Several economists and financial researchers have projected that the S&P 500 index is likely to gain 15-20% in 2020 even though this is the U.S. presidential election year. Historically, the index provided 6.3% annual returns in presidential election years and was up 78% of the time. Meanwhile, trade deals, a stable U.S. economy and a dovish Fed are near-term catalysts for the benchmark index.
The recently signed interim trade deal between the United States and China will be a major relief to the year-long tariff-related conflict. The phase-one trade deal is a major boost to the economies of the two largest trading nations of the world and lowers the likelihood of a global economic slowdown.
Moreover, on Jan 16, the U.S. Senate overwhelmingly voted in favor of the U.S.-Mexico-Canada Agreement (USMCA), sending the pact to President Donald Trump for signature. The newly formed USMCA will replace the previous NAFTA for which Trump has several reservations.
Finally, an accommodative Fed, which reiterated its commitment to do whatever needed to support economic expansion, will be a major catalyst for future growth. The central bank has decided not to raise interest rate until the inflation rate, which is currently at just 1.6%, crosses the Fed’s target level of 2%.
Our Top Picks
At this stage, it will be prudent to invest in the S&P 500’s strong growth potential. We have narrowed down our search to five S&P 500 stocks. Each of our picks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows price performance of our five picks in the past three months.
Apple Inc. (AAPL - Free Report) designs, manufactures and sells iPhone, iPad, iPod, Apple TV, Mac personal computers, Apple Watch, HomePod and AirPods. These devices are powered by software applications including iOS, macOS, watchOS and tvOS operating systems. The company has an expected earnings growth rate of 10.7% for the current year (ending September 2019). The Zacks Consensus Estimate for the current year has improved 0.8% over the last 60 days.
Applied Materials Inc. (AMAT - Free Report) provides manufacturing equipment, services and software to the semiconductor, display and related industries. It operates through three segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. The company has an expected earnings growth rate of 24% for the current year (ending October 2020). The Zacks Consensus Estimate for the current year has improved 2.4% over the past 60 days.
Synopsys Inc. (SNPS - Free Report) is a vendor of electronic design automation software to the semiconductor and electronics industries. The company has an expected earnings growth rate of 14.5% for the current year (ending October 2020). The Zacks Consensus Estimate for the current year has improved 4.6% over the past 60 days.
Copart Inc. (CPRT - Free Report) provides online auction and a wide range of remarketing services to process and sell salvage and clean title vehicles. The company has an expected earnings growth rate of 23.1% for the current year (ending July 2020). The Zacks Consensus Estimate for the current year has improved 5.7% over the past 60 days.
State Street Corp. (STT - Free Report) provides a range of investment management products and services for institutional investors worldwide through its subsidiaries. The company has an expected earnings growth rate of 15.9% for the current year. The Zacks Consensus Estimate for the current year has improved 7.4% over the past 60 days.
7 Best Stocks for the Next 30 Days
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