Wall Street Bull Run to Continue Despite Volatility: 5 Picks

Wall Street recently exhibited how quickly data, news, sentiments of market participants and geopolitical tensions can influence the stock market and bring about a dramatic change to investors’ fortunes.

After pouring positive returns on investors in the first three quarters of 2018, a market rout ended the fourth quarter on a negative note. Traces of that mayhem were all erased over the three-month period that ensued, helping Wall Street rebound with the best quarterly performance in a decade. Also, Wall Street manage to overcome the negative effects of a yield inversion-related downturn in the last week of March, in less than a week’s time.  

The final result is Wall Street still raging forward withstanding intermittent volatilities and fluctuations for the last 10 years. What’s more, the bull run is likely to continue in the near term as well.

Strong Global Economic Data

On Apr 1, the Institute for Supply Management (ISM) reported that U.S. manufacturing expanded in March for the 119th consecutive month. March index came in at 55.3. Notably, the index for February was 54.2, its lowest level since November 2016. Moreover, U.S. construction spending increased 0.1% in February, to a nine-month high. This was the third straight month of rise in U.S. construction spending.

Most importantly, manufacturing activity in China surged in March despite threats of an economic slowdown. The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) came in at 50.8 for March, rising from 49.2 in February. This marked the first expansion of the Chinese manufacturing sector in the last four months.

In Eurozone, inflation fell sharply in March. Per Eurostat, consumer price index dropped to 1.4% in March from 1.5% in February. The core inflation index fell sharply to 0.8% in March from 1% in February.

Recessionary Fears Overblown

On Apr 1, the yield on the benchmark 10-year U.S. Treasury Note rose 8 basis points to 2.496% and yield on 30-year U.S. Treasury Note rose 7 basis points to 2.89%. This was the biggest single-day gain in yields since Jan 4 for both the long-term government bonds. The yield on mid-term 2-year U.S. Treasury Note also rose 5 basis points to 2.326%, posting its biggest daily gain since Jan 8.

On Mar 22, the yield on 3-month U.S. Treasury Note surged ahead of the benchmark 10-year U.S. Treasury Note for the first time since 2007. On Mar 25, the yield on 10-year U.S. Treasury Note fell to its lowest level since December 2017. However, as investor’s risk appetite increased for equities, bond prices decreased, eliminating the chance of a recession any time soon.

First-Quarter Growth Forecast Steadied 

Although we are yet to get consensus estimates for first-quarter GDP, several industry experts are revising their previously given estimates upward.

The Atlanta Fed, which estimated first-quarter GDP growth at a meager 0.3% on Mar 2, revised it to 1.3% on Mar 26 and further to 1.5% on the next day. Further, it raised the Mar 29 forecast of 1.7% to 2.1% on Apr 1.  

Research firm J.P. Morgan raised its first-quarter growth forecast to 2% from 1.5%. Goldman Sachs raised its estimate to 1.2%, reflecting an increase of 40% from the previous forecast. The CNBC/Moody's Analytics Rapid GDP update median tracking forecast is currently pegged at 1.5%, up 0.2% from the previous week.

Our Top Picks 

The U.S. economy is likely to maintain its long-term growth albite at a slow pace. At this stage, investment in stocks with strong growth potential should be lucrative. Our selection is backed by a Growth Score of A and Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Insperity Inc. NSP provides human resources and business solutions to enhance the business performance of small and medium-sized businesses in the United States. Insperity looks strong on the back of a booming professional employer organization industry. The company offers a comprehensive suite of Workforce Optimization and Workforce Synchronization solutions.

The stock has surged 34.9% year to date. The company has an expected earnings growth rate of 22.4% for the current year. The Zacks Consensus Estimate for the current year improved 6.5% over the last 60 days.