The first half of 2020 was marked by huge volatility mainly triggered by the COVID-19 outbreak, which has led to wild swings in the stock market. At the same time, the Federal Reserve and the government unveiled a huge stimulus to shield the virus-stricken economy.
Below we discuss some of the events that dominated the headlines in 1H and are worth watching in the second half too:
The coronavirus outbreak in late February in the United States led to a historic sell-off in equity markets, ending the country’s biggest bull market run in history. The three major U.S. indices slipped into a bear market in less than a month, representing the fastest-ever bear market.
However, the stocks made a solid comeback from the lows buoyed by a surging technology sector, an unprecedented stimulus from the central bank and the government, and hopes of a coronavirus vaccine. Additionally, the latest bouts of data indicate that the economy has been recovering faster than expected from the COVID-19 pandemic. The Nasdaq Composite Index has hit new highs lately, gaining in double digits though the S&P 500 and the Dow Jones are still in red from a year-to-date look.
While almost every sector of the market has gained in the latest rally, information technology and consumer discretionary emerged as the clear winners. IZEA Worldwide Inc. (IZEA - Free Report) , which creates and operates online marketplaces that connect marketers and content creators, is the biggest gainer of the first half in the technology sector. The stock has an estimated earnings growth of more than 72% for this year. It carries a Zacks Rank #2 (Buy) and has a solid Growth Score of B. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
In the consumer discretionary segment, the Zacks Ranked #2 LiveXLive Media Inc. (LIVX - Free Report) soared nearly 123%. It provides an online destination for music fans to enjoy premium live performances from music venues and leading music festivals, such as Rock in Rio, Outside Lands Music and Arts Festival, Hangout Music Festival as well as premium original content, artist exclusives and industry interviews.
Fed Chair Jerome Powell maintained a dovish stance and stated that there is no expectation of a rate hike through 2022. The central bank has pledged to continue pumping in stimulus until the economy is back on track.
The central bank slashed its interest rate to a range of 0% to 0.25% in mid-March in a bid to protect against the coronavirus pandemic's economic toll. It followed up its rate cuts with unprecedented lending programs, extending credit to corporations, households and municipalities. The central bank also set a floor for its asset purchases, pledging to take in at least $80 billion in Treasuries every month and $40 billion worth of mortgage-backed securities.
Low rates are a boon for high-yield sectors such as utilities and real estate given their sensitivity to interest rates. Some of the top-ranked stocks from these spaces include Atlantic Power Corporation (AT - Free Report) , Vistra Energy Corp. (VST - Free Report) , Exp World Holdings Inc. (EXPI - Free Report) and Gladstone Land Corporation (LAND - Free Report) . These stocks have a Zacks Rank #1 or 2, suggesting their outperformance in the months ahead. Further, these stocks are expected to generate solid earnings growth next year (AT – 309%, VST – 64.7%, EXPI – 173.3% and LAND – 19.3%).
Oil’s Wild Swings
Oil has been the most volatile commodity this year. The liquid commodity collapsed to below zero (negative $40) on Apr 20 for the first time ever as the economic turmoil caused by the coronavirus pandemic has resulted in crashing demand and rising stockpiles.
However, oil made the greatest comeback in history in the wake of production cuts by major oil producers and an uptick in demand with easing lockdowns measures. Oil producers have started scaling back their production at record levels. The most-notable development comes from OPEC, the 14-nation organization, and its allies that have agreed to extend historic production cuts of 9.7 million barrels per day (about 10% of global supply) by another month, through the end of July. Additionally, the stockpile is declining slowly, easing the storage crisis.
Further, demand for oil has been recovering across the world as pandemic-forced lockdowns have been lifted and the economy is recovering. Demand in China, the second-largest market in the world accounting for 15% of the world’s oil demand, has returned to pre-pandemic levels.
Investors should note that oil price registered its best month in history, climbing about 88% in May. As a result, the energy sector enjoyed a huge surge, giving back most of its losses incurred early in the year. Key Energy Services Inc. (KEGX - Free Report) , having a Zacks Rank #3 (Hold), has been the biggest winner this year, climbing nearly 200%.
The COVID-19 pandemic has ramped up the digital shift, which is likely to last even if the economy reopens. The stay-at-home mandates across many parts of the world to contain the spread of coronavirus has propelled consumers to come online for almost everything from shopping to work and entertainment at home. It has raised demand for cloud computing, gaming and e-sports, as well as streaming services, resulting in the skyrocketing prices for these companies. The trend is likely to continue given the second wave of coronavirus infections.
Given this, investors could bet on the booming trend with the best-performing stock of 1H in this space. Fastly Inc. (FSLY - Free Report) has surged 279% so far this year and has a Zacks Rank #2. The company offers cloud computing, image optimization, security, edge computer technology and streaming solutions. It has seen solid earnings estimate revision of 20 cents over the past three months for this year and has an expected growth rate of 57.7%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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