Are Americans more confident about their economy despite Wall Street entering the 11th year of expansion this month? A recent CNN poll has revealed that 71% of U.S. people believe the economy is in good shape while 27% differ.
U.S. consumers’ net worth took a hit in 2018 owing to a stock market meltdown and tepid housing market conditions. However, the market recouped most of the losses on positive development on the trade war front and the Fed’s dovish monetary stance. Despite warnings of an impending recession by some industry experts, a closer look at the U.S. economy has a different story to tell.
Access to Easy Money Continues
A significant Wall Street rebound and the Fed’s to be patient with further rate hikes open the floodgate of easy money supply to U.S. individuals.
The three key stock market indexes have gained impressively so far in 2019, marking the best start by Wall Street in three decades. Year to date, the Dow, S&P 500 and Nasdaq have risen a respective 11.1%, 13% and 16.3%.
The Fed is unlikely to change its benchmark interest rate structure in its two-day long FOMC meeting which will start on Mar 19. On Jan 30, the Federal Reserve decided to keep the federal funds target rate unchanged at the range of 2.25-2.50%.
Per Powell, the central bank will maintain its dovish monetary stance at least for the time being. On Feb 27, in his testimony before the House Committee, Fed Chair Jerome Powell said that the central bank will not downsize its $4-trillion balance sheet this year.
Recessionary Concerns Overblown
On Mar 10, in an interview with “60 Minutes,” Powell said that the U.S. economy will continue to grow in 2019 albeit at a slower pace. Fundamentals of the U.S. economy remain strong. Powell ruled out concerns about a recession in the near future.
Per a recent study conducted by NBC News/ Wall Street Journal, 53% of Americans think there will be no recession in the next 12 months while 33% are of the view that the economy may contract.
The Conference Board’s Consumer Confidence index for February surged to 131.4, its highest in four months. The consensus estimate was 124.8. Moreover, the Future expectation index (which tracks consumers’ expectations for the next six months) jumped to 103.4 from 89.4.
The U.S. economy added just 20,000 jobs in February, possibly due to the 35-day long partial government shutdown. Meanwhile, wage rate grew 0.4%. The unemployment rate also fell to the historic low of 3.8% from 4% in January. Inflation is well under control below the 2% benchmark set by the Fed.
Positive Development on Trade War Front
The 11-month trade dispute between the United States and China is possibly headed toward a solution. On Mar 12, U.S. Trade Representative Robert E. Lighthizer said that the government is hopeful about a final deal with China within a few weeks. The two sides have reportedly come to an understanding about currencies. Negotiations are underway as to how China is going to protect U.S. intellectual properties.
Our Top Picks
The U.S. economy is likely to maintain long-term growth albeit at a slow pace. Thus, it will be prudent to buy stocks that have rallied so far this year and have the potential to maintain it. We narrowed down our search on five such stocks with a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the year-to-date price performance of our five picks.
Hilton Worldwide Holdings Inc. HLT, a hospitality company, owns, leases, manages, develops, and franchises hotels and resorts. The stock has surged 20% year to date. The company has expected earnings growth rate of 34.8% for the current year. The Zacks Consensus Estimate for the same has moved 21.3% up over the past 60 days.
Xilinx Inc. XLNX designs and develops programmable devices and associated technologies worldwide. The stock has surged 47.1% year to date. The company has expected earnings growth of 23.3% for the current year. The Zacks Consensus Estimate for the same has risen 6.1% over the past 60 days.
Quanta Services Inc. PWR provides specialty contracting services to the electric power, communication, and oil and gas industries in the United States, Canada, Australia, Latin America, and internationally. The stock has rallied 24.3% year to date. The company has expected earnings growth of 25.3% for the current year. The Zacks Consensus Estimate for the same has improved 7.3% over the past 60 days.
Anthem Inc. ANTM operates as a health benefits company in the United States. The stock has risen 17.3% year to date. The company has expected earnings growth of 20.4% for the current year. The Zacks Consensus Estimate for the same has moved 8.8% north over the past 60 days.
Celgene Corp. CELG discovers, develops, and commercializes therapies for the treatment of cancer and inflammatory diseases worldwide. The stock has surged 37.3% year to date. The company has expected earnings growth of 21% for the current year. The Zacks Consensus Estimate for the same has risen 3.8% over the past 60 days.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
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Quanta Services, Inc. (PWR) : Free Stock Analysis Report
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