Volatility has crept back into the markets this December, thanks to the turbulent trade front. After President Trump said on Dec 3 that a trade deal with China is unlikely before the 2020 U.S. elections, the broader market took a serious beating.
Trump said that he had “no deadline” when it comes to settling the lingering trade issues with China. Major bourses had earlier hit several record highs on hopes of a trade deal, at least by Dec 15. But, Trump’s comments squashed all hopes.
But, a report that a phase-one trade deal between is still in the works helped U.S. stocks close higher on Dec 4. Bloomberg news, citing familiar sources, confirmed that a partial trade deal would be complete before the imposition of the 15% tariff on consumer goods from China on Dec 15.
So, one thing is for sure that the U.S. stock market movement is predominantly based on trade-related news and rumors. But, the overall outperformance of the U.S. stocks for quite some time has been no fluke. Lest we forget, the broader S&P 500 has gained more than 20% so far this year and it’s solely because of the fundamental strength of the U.S. economy and the prospects of top U.S. firms that outpace their global counterparts.
The pace of U.S. economic expansion picked up in the third quarter. Per the Bureau of Economic Analysis, the economy grew at an annualized rate of 2.1% in the three months ended Sep 30, more than the initial estimate of 1.9% and the 2% pace in the second quarter.
Some skeptics may argue that growth hasn’t crossed the coveted 3% mark but is strong enough to drive the unemployment level down to an almost 50-year low. The housing market, in the meantime, has recovered well and at least half of U.S. home values are above where they were before the sub-prime crisis. What’s more, U.S. banks now have more capital base and are under tighter regulations that will prevent them from repeating the mistakes made during the crisis.
In contrast, if we look at other developed countries like Japan, despite several measures by the Bank of Japan, its economy has failed to return to their 1980s glory. In the Eurozone, big banks are pretty much struggling and Germany is facing layoffs in the auto industry. Several countries in Europe and even in Japan had issued bonds with negative interest rates, indicating how pessimistic investors in such countries are about their financial prospects.
And when it comes to emerging economies, it’s certainly a hyped space. Most of the emerging economies are dependent on China, which itself has a non-transparent market. Last but not the least, there are very few countries that can match the growth of the US technology and biotech sectors.
Thus, investors should ideally work their way around stock market gyrations triggered by trade issues. Investing in sound U.S. companies that have solid growth narratives, banking on the fundamental economic strength, is one such way.
5 Top US Stocks to Add to Your Portfolio
We have selected five U.S. stocks that should make meaningful additions to your portfolio. These stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The search was also narrowed down with 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.
American Superconductor Corporation AMSC provides megawatt-scale solutions. The company was founded in 1987 and is headquartered in Ayer, MA. The Zacks Consensus Estimate for its current-year earnings has moved up 23.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 45.3% against the Electronics – Miscellaneous Components industry’s expected decline of 14.1%.
Cardtronics plc CATM provides automated consumer financial services through its network of ATMs and multi-function financial services kiosks. The company was founded in 1989 and is based in Houston, Texas. The Zacks Consensus Estimate for its current-year earnings has moved 3.4% north over the past 60 days. The company’s expected earnings growth rate for the current year is 12.2% compared with the Financial Transaction Services industry’s projected rise of 9.2%.
Foundation Building Materials, Inc. FBM distributes building products. The company was founded in 2011 and is headquartered in Tustin, CA. The Zacks Consensus Estimate for its current-year earnings has climbed 4.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 148.8% compared with the Building Products – Miscellaneous industry’s expected increase of 5.3%.
Lithia Motors, Inc. LAD operates as an automotive retailer. Lithia Motors was founded in 1946 and is headquartered in Medford, Oregon. The Zacks Consensus Estimate for its current-year earnings has risen 4.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 18.3% compared with the Automotive – Retail and Whole Sales industry’s expected rise of 15.4%.
Shoe Carnival, Inc. SCVL operates as a family footwear retailer. Shoe Carnival was founded in 1978 and is based in Evansville, Indiana. The Zacks Consensus Estimate for its current-year earnings has moved up 3.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 17.6% compared with the Retail – Apparel and Shoes industry’s estimated growth of 0.6%.
Shares of American Superconductor, Cardtronics, Foundation Building Materials, Lithia Motors and Shoe Carnival have gained 133.7%, 139.1%, 46.1%, 31.3% and 46.5%, respectively, over the past two-year period. Take a look —
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