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U.S. Household Net Worth Hits Record High in Q2: 5 Picks

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·7 min read
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The net worth of American households reached a fresh all-time high in the second quarter of 2021 supported by a faster-than-expected recovery of the U.S. economy from the pandemic-led devastations. On Sep 23, Fed reported that household net worth surged $5.85 trillion or 4.3% in second-quarter 2021 from the first quarter to reach $141.7 trillion.

Year over year, the net worth of Americans jumped 19.6% as second-quarter 2020 was fully affected by the global outbreak of the deadly coronavirus. The value of equities increased nearly $3.5 trillion while the value of real estate held by households rose around $1.2 trillion.

The U.S. economy grew 6.5% in the second quarter buoyed by a robust economic recovery. In absolute term, U.S. GDP in second-quarter 2021 came in at $19.4 trillion, exceeding $19.2 trillion recorded in fourth-quarter 2019, the last quarter before the global outbreak of coronavirus.

Reasons for Surging Household Net Worth

A sharp reduction in new coronavirus cases, nationwide COVID-19 vaccination and the gradual removal of economic and other day-to-day restrictions have resulted in a faster-than-expected reopening of the U.S. economy.

Moreover, a massive $1.9 trillion fiscal stimulus injected by the Biden Administration in March and the continuation of easy monetary policies by the Fed, keeping the benchmark lending rate near zero and buying bonds of $120 billion per month helped in the U.S. economy's recovery and enhanced the household net worth.

The U.S. stock market ended the second quarter of 2021 on a high note. The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — rallied 4.6%, 8.2% and 9.5%, respectively. Moreover, the small-cap specific Russell 2000 advanced 4.1% and the mid-cap centric S&P 400 gained 3.3%. All these reflect a broad-based rally in second-quarter 2021.

On the other hand, the housing market has remained robust primarily due to record-low mortgage rates. The Fed adopted an ultra-dovish monetary stance and reduced the benchmark interest rate to as low as 0-0.25% in March 2020. The low rate of market interest rate significantly reduced mortgage rates, enabling consumers to buy houses. The strong demand has strengthened the real estate sector.

Momentum Likely to Continue

The Wall Street rally continued in the first two months of third-quarter 2021 before suffering a big blow in September. However, U.S. stock markets rebounded impressively in the last two trading sessions and recouped a large part of the loss it suffered in September. The Dow and the S&P 500 recorded their best two consecutive day rally since July and the Nasdaq Composite registered the best two successive day rally since August.

In his statement after the conclusion of the two-day FOMC meeting on Sep 22, Fed Chairman Jerome Powell said “If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted.” However, the impact of tapering seems already factored in market valuations.

Finally, on Aug 24, the House of Representatives advanced a $1 trillion bipartisan infrastructure bill. On Aug 10, the U.S. Senate had passed a bipartisan infrastructure bill of $550 billion in addition to the previously approved funds of $450 billion for five years.

Total spending may go up to $1.2 trillion if the plan is extended to eight years. Infrastructure projects such as roads, bridges, passenger rails, airports, drinking water and waste-water systems, high-speed Internet, and climate-related infrastructure should benefit.

Our Top Picks

We have narrowed down our search to five large-cap (market capital > $10 billion) stocks have given double-digit returns in the past three months with more upside potential for the rest of 2021. These stocks have seen solid earnings estimation revisions in the last 30 days. Finally, 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 the price performance of our five picks in the past three months.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Regeneron Pharmaceuticals Inc. REGN is benefiting from strong demand for Eylea and Dupixent. Continued growth in Eylea and Dupixent through further penetration in existing indications and a promising late-stage pipeline aid its prospects. The approval of Libtayo in the lucrative indication of NSCLC and BCC should also boost sales.

This Zacks Rank #1 company has an expected earnings growth rate of 90% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1.5% over the last 7 days. The stock price has jumped 17.5% in the past three months.

Continental Resources Inc. CLR explores, develops and produces crude oil and natural gas primarily in the north, south, and east regions of the United States. It sells crude oil and natural gas production to energy marketing companies, crude oil refining companies, and natural gas gathering and processing companies. Continental Resources has a premier position in the Bakken area.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 5.3% over the last 30 days. The stock price has climbed 12.5% in the past three months.

O'Reilly Automotive Inc. ORLY operates as a retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States. The specialty retailer of automotive aftermarket parts is poised to benefit from store openings and distribution centers in profitable regions.

The company has a competitive edge due to a dual market strategy by serving the Do-it-Yourself and Do-it-for-Me customers. A customer-centric business model and the growing demand for high-quality auto parts are likely to boost O’Reilly’s prospects.

The company has an expected earnings growth rate of 17.5% for the current year. The Zacks Consensus Estimate for its current-year earnings improved 0.1% over the last 30 days. The stock price has appreciated 12.4% in the past three months.

Darling Ingredients Inc. DAR develops, produces, and sells natural ingredients from edible and inedible bio-nutrients. It operates through three segments: Feed Ingredients, Food Ingredients, and Fuel Ingredients.

The company has an expected earnings growth rate of 90.3% for the current year. The Zacks Consensus Estimate for the current year improved 3% over the last 30 days. The stock price has surged 12.3% in the past three months.

The Mosaic Co. MOS produces and markets concentrated phosphate and potash crop nutrients in North America and internationally. It operates through three segments: Phosphates, Potash, and Mosaic Fertilizantes.

Demand for phosphate and potash in North America remains strong in 2021. Strong grower economics and crop commodity prices are driving fertilizer demand globally. The company should also gain from higher prices. The acquisition of Vale Fertilizantes is also expected to deliver significant synergies. Mosaic is also expected to benefit from its cost-reduction initiatives.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings improved 3.8% over the last 30 days. The stock price has advanced 12.1% in the past three months.


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Regeneron Pharmaceuticals, Inc. (REGN) : Free Stock Analysis Report

OReilly Automotive, Inc. (ORLY) : Free Stock Analysis Report

Darling Ingredients Inc. (DAR) : Free Stock Analysis Report

The Mosaic Company (MOS) : Free Stock Analysis Report

Continental Resources, Inc. (CLR) : Free Stock Analysis Report

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