Is Halloween the Best Time to Invest? 5 Solid Buys

The broader market is just shy of correction territory since the United States is about to intensify its trade war with China. The rising interest scenario is a dampener for corporates and individuals.

But, don’t sell now. This isn’t a bear market yet and definitely a recession isn’t near. Instead, Halloween is around the corner and it marks the best stretch of growth, historically, for the stock market.  Moreover, the nation’s gross domestic product (GDP) could come teasingly close to a 13-year milestone this year.

Thanks to such optimism, investors should focus on fundamentally sound companies that can make the most of the seasonally favorable periods of the stock market calendar.

What’s Spooking the Markets?

Strained trade relation between the United States and China is affecting the equity market. The United States is preparing to announce by early December tariffs on all Chinese imports provided President Trump and Xi Jinping fail to reach a middle ground. Tariffs, anyway, will squeeze corporate profits and hamper growth.

Rapidly climbing benchmark bond yield has already fueled fears that the profit margins of U.S. corporates will get hurt by steeper borrowing costs. At the same time, individuals looking to buy a home or condo will be hurt as the cost of financing the purchase will increase as rates go up.

The Fed, by the way, has raised its federal funds rate three times this year and that typically spells short-term jitters for stocks, especially, now when the equity market is deemed lofty by some measures. Trump himself has partly blamed the Fed for the market adversities.

Halloween to May Day: The Best Stretch to Invest

Despite the market turmoil, the coming days may be a good time to increase your stock exposure until next spring. Of course, we are referring to the stock market’s famous six-month seasonal effect which is known by the names of “The Halloween Indicator” and “Sell in May and Go Away.”

The stock market, historically, gains in the Halloween-through-May-Day period, or the so-called “winter” months. Meanwhile, markets have been more or less flat during the “summer” months (May-October). Since 1950, the Dow Jones has registered an average gain of 7.5% during the November-April period, while the blue-chip index yielded a meager 0.3% in the May-October period.

Furthermore, the stock market’s gain during the winter months of presidential terms’ third year, which is just beginning, has been quite impressive. During this period, the Dow Jones has gained an average 12% compared to the winter months of the one-, two-, and four years of the presidential terms average gain of just 2.9%.

But, it’s just not historical trends that make one optimistic. Chances of a market downtrend are unlikely as economic fundamentals remain favorable. 

U.S. Economy in Good Shape

The U.S. economy has increased at an annualized pace of 3.5% in the third quarter, per the U.S. Commerce Department. Economic growth during the July-September quarter was better than estimates of about 3.4%.

In fact, the country’s total output of goods and services followed an even stronger 4.2% growth in the second quarter, which marked the strongest rise since a 4.3% annual gain in the third quarter of 2014. Consumer spending was largely driven by strength in the labor market. The U.S. unemployment rate fell to a 49-year low of 3.7% in September, the lowest since December 1969, per the Labor Department.

The two quarters, thus, recorded the fastest six-month growth in four years and is on track to hit Trump administration’s annual growth target of 3%. If that happens, it would be the best yearly performance since 2005, two years before the Great Recession.

5 Top Picks

Since a buying opportunity maybe playing out in the equity market, investing in solid stocks will be prudent. These stocks not only possess a Zacks Rank #1 (Strong Buy) but also are poised to gain significantly in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.

Such stocks also flaunt a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.

ArcBest Corporation ARCB provides freight transportation services and integrated logistics solutions. In the last 60 days, four earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 0.6% in the same period. The company’s expected earnings growth rate for the current year is 145.1% compared with the Transportation - Truck industry’s estimated rally of 47.6%.

Express, Inc. EXPR operates as a specialty apparel and accessories retailer. In the last 60 days, one earnings estimate moved up, while none moved down for the current year. The Zacks Consensus Estimate for earnings rose 2.2% in the same period. The company’s expected earnings growth rate for the current year is 30.6% compared with the Retail - Apparel and Shoes industry’s estimated rally of 9.8%.

Arch Coal, Inc. ARCH produces and sells thermal and metallurgical coal from surface and underground mines. In the last 60 days, five earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings soared 39.4% in the same period. The company’s expected earnings growth rate for the current year is 32.5% compared with the Mining - Miscellaneous industry’s estimated rise of 3.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Bristol-Myers Squibb Company BMY discovers, develops, licenses, manufactures, markets, and distributes biopharmaceutical products. In the last 60 days, six earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 6.1% in the same period. The company’s expected earnings growth rate for the current year is 26.6% compared with the Large Cap Pharmaceuticals industry’s estimated rally of 8.9%.

Methanex Corporation MEOH produces and sells methanol. In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose almost 7% in the same period. The company’s expected earnings growth rate for the current year is 65.8% compared with the Chemical - Diversified  industry’s estimated rise of 15.5%.

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