The U.S. stock market, primarily measured by the S&P 500 index, has rallied around 18% so far in 2019. And the bull run is sure to stay going into 2020. In fact, chief investment strategist at CFRA Research, Sam Stovall said that the broader index is expected to rise an additional 9% by the end of 2020.
After all, there are an array of factors that will help the major bourses stay at record highs next year. Primarily, it’s the preliminary U.S.-China trade truce over import duties that will boost stocks. The United States has said that China has agreed to increase import of commodities in 2020 and 2021 by almost $200 billion, which includes nearly $40 billion of U.S. agricultural products.
China has also agreed to protect American intellectual property rights and has assured not to manipulate its currency. What’s more, China has called off additional tariffs on U.S. goods. The United States, in the meanwhile, has agreed not to impose extra tariffs on nearly $160 billion of Chinese consumer electronics and toys that were supposed to take effect from Dec 15.
Beijing had earlier blamed the United States of economic bullying. Both the countries had imposed tit-for-tat tariffs that had eventually affected China’s economy, threatened U.S. farmers and damaged global economic growth, resulting in gyrations in global stock markets.
Nonetheless, upbeat reports on domestic manufacturing and home building have infused optimism about the current state of the economy. Last month, factory output bounced back after General Motor Company’s strike ended, per the Federal Reserve.
Industrial production increased at a seasonally adjusted rate of 1.1% in November compared to the prior month. That marked the biggest month-over-month increase since October 2017. Now, if we exclude motor vehicles and parts, industrial production was still up 0.5% last month. Capital Economics economist Michael Pearce summed up by saying that “against a backdrop of easing trade tensions, the prospects for the industrial sector look set to brighten a touch in 2020.”
Another reading on the U.S. housing sector saw construction of new homes jump in November, a tell-tale sign of continued momentum in the housing sector. Per the Commerce Department, housing starts, a measure of home building, increased 3.2% last month from October to a seasonally adjusted annual rate of 1.365 million.
Building permits show that future home construction increased 1.4% in November compared to the previous month to a seasonally adjusted annual rate of 1.482 million. Thus, it can be safely concluded that the housing sector has strengthened this year and will likely continue doing well next year following a slump that began in late 2018 (read more: Millennials to Drive US Housing Market in 2020: 5 Must Buys).
Last but not the least, the Fed is likely to continue its monetary easing program next year as well. And that should help the stock market continue its winning ways in 2020. To top it, president election years are also traditionally highly favorable for stocks.
5 Top Growth Stocks to Buy for 2020
Given the bullishness, it seems prudent to invest in stocks that can make the most of the market’s upward journey next year. We have thus used the Zacks Stock Screener to narrow down on stocks with solid growth prospects, sporting a Zacks Rank #1 (Strong Buy) along with Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
TopBuild Corp. BLD engages in the installation and distribution of insulation and other building products to the U.S. construction industry. The Zacks Consensus Estimate for its next-year earnings has moved up 8.3% over the past 60 days. The company’s expected earnings growth rate for the next year is 14.5%, more than the Building Products - Miscellaneous industry’s expected rise of 12.9%.
Foundation Building Materials, Inc. FBM distributes building products in the United States. It offers wallboard, suspended ceiling system and metal framing products. The Zacks Consensus Estimate for its next-year earnings has moved 1.7% north over the past 60 days. The company’s expected earnings growth rate for the next year is 20.6% versus the Building Products - Miscellaneous industry’s projected rise of 12.9%.
Simpson Manufacturing Co., Inc. SSD designs, engineers, manufactures and sells building construction products. The Zacks Consensus Estimate for its next-year earnings has climbed nearly 9% over the past 60 days. The company’s expected earnings growth rate for the next year is 19.3%, compared with the Building Products - Miscellaneous industry’s estimated rise of 12.9%.
Universal Forest Products, Inc. UFPI designs, manufactures, and markets wood and wood-alternative products in North America. The Zacks Consensus Estimate for its next-year earnings has risen 4.6% over the past 60 days. The company’s expected earnings growth rate for the next year is 16.8% versus the Building Products - Wood industry’s expected rise of 15.2%.
Lithia Motors, Inc. LAD operates as an automotive retailer in the United States. The Zacks Consensus Estimate for its next-year earnings has moved 5.5% up over the past 60 days. The company’s expected earnings growth rate for the next year is 13.6% compared with the Automotive - Retail and Whole Sales industry’s expected rise of 8.8%.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?
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Click to get this free report Lithia Motors, Inc. (LAD) : Free Stock Analysis Report TopBuild Corp. (BLD) : Free Stock Analysis Report Simpson Manufacturing Company, Inc. (SSD) : Free Stock Analysis Report Universal Forest Products, Inc. (UFPI) : Free Stock Analysis Report Foundation Building Materials, Inc. (FBM) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research