Wall Street is set to close impressively in 2019 with several fresh highs recorded by the three major stock indexes. Year to date, the Dow, the S&P 500 and the Nasdaq Composite have rallied a little over 20.6%, 26.4% and 31.6%, respectively. Currently, these indexes are at striking distance from their previous best yearly performances recorded in 2013, when these indexes returned a respective 26.5%, 29.6% and 38.3%.
A stable U.S. economy, which is expanding for a record 11 years, a partial trade deal with China, possible solution of Brexit and easy monetary policy adopted by the Fed are likely to pave the way for Wall Street’s rally in 2020. Consequently, it will be a good strategy to invest in stocks with long-established businesses and brand-value (market cap > 100 billion) that have skyrocketed in 2019 and still have strong momentum for 2020.
U.S-China Partial Trade Deal
On Dec 13, both United States and China declared that they have reached a phase-one trade deal to resolve more than a year-long trade dispute and tariff war. The deal is expected to be signed by the two presidents in the first week of January 2020, after clearing legal hurdles in respective parliaments.
Per the deal, the United States will reduce tariff rate from 15% to 7.5% on $120 billion Chinses exports while keeping 25% tariff intact on $150 billion Chinse goods, mostly used as inputs for the high-tech sector. Moreover, the Trump administration will also cancel imposition of 15% tariff on fresh $160 billion Chinese products mainly used for making consumer goods.
On the other hand, China has pledged to purchase $40 billion agricultural products from the United States per year. U.S. officials are still trying to raise the threshold to $50 billion per annum. Moreover, China will also rollback on some tariffs imposed on U.S. exports.
Possibility of Brexit Soon
On Dec 12, British prime minister Boris Johnson and his Conservative Party won a landslide victory in the recently concluded general election in the U.K. Notably, Boris Johnson is a major supporter of Brexit and that was his main election issue.
After winning the election, he said, “At this stage it does look as though this one-nation Conservative government has been given a powerful new mandate, to get Brexit done and not just to get Brexit done but to unite this country and to take it forward.”
Per CNBC, European Union leaders have roundly declared that it’s now time to get on with Brexit after U.K. Prime Minister Boris Johnson secured an emphatic win in the country’s general election.
Easy Monetary Stance Adopted by Major Central Banks
Reversing its highly hawkish monetary stance of 2019, the Fed adopted a dovish stance since the beginning of this year and reduced the benchmark interest rate by 75 basis points in three tranches. On Dec 12, Fed Chair Jerome Powell reiterated that the central bank is set to maintain a stable monetary policy in 2020 and can only think about raising rates if inflation surges systematically.
The European Central Bank has also decided to maintain a negative interest rate policy and continue its bond purchase or quantitative easing strategy. Moreover, Bank of Japan is also maintaining negative interest rate. Central banks of major emerging economies including China, India, Australia, Thailand and New Zealand have also adopted low-rate policies.
Our Top Picks
At this stage, we have narrowed down our search to five corporate behemoths stocks that have skyrocketed in 2019 and still have lot of upside for 2020. All these stock carry either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows price performance of our five picks year to date.
QUALCOMM Inc. QCOM designs, develops, manufactures and markets digital communication products worldwide. It operates through three segments: Qualcomm CDMA Technologies, Qualcomm Technology Licensing, and Qualcomm Strategic Initiatives.
The company’s expected earnings growth rate for the current fiscal year (to end in September 2020) is 16.4%. The Zacks Consensus Estimate for the current fiscal year has improved 4.3% over the last 60 days. The Zacks #1 Rank stock has soared 54.3% year to date.
NVIDIA Corp. NVDA offers graphics chip processors and related software for a wide range of visual computing platforms. It operates in two segments, GPU (graphic processing unit) and Tegra Processor. The company is a worldwide leader in visual computing technologies and the inventor of the GPU.
The company’s expected earnings growth rate for the next fiscal year (to end in January 2021) is 29.7%. The Zacks Consensus Estimate for the next fiscal year has improved 1.7% over the last 30 days. The Zacks #2 Rank stock has rallied 67.8% year to date.
Charter Communications Inc. CHTR provides cable services to residential and commercial customers in the United States. It offers video on demand, high definition television, digital video recorder, pay-per-view, and spectrum mobile and spectrum guide services, as well as ad-supported free online video products.
The company’s expected earnings growth rate for the next year is 97.5%. The Zacks Consensus Estimate for the next year has improved 8.7% over the last 60 days. The Zacks #2 Rank stock has jumped 66.8% year to date.
Microsoft Corp. MSFT is one of the largest broad-based technology providers in the world today. Although its Windows-based software is the most important revenue source, the company’s offerings also include hardware and online services.
The company’s expected earnings growth rate for the current fiscal year (to end in June 2020) is 12.6%. The Zacks Consensus Estimate for the current fiscal year has improved 2.7% over the last 60 days. The Zacks #2 Rank stock has surged 52.1% year to date.
Thermo Fisher Scientific Inc. TMO is a scientific instrument maker and a world leader in serving science. It provides analytical and other instruments, laboratory equipment, software, consumables, reagents, instrument systems, chemicals, supplies, and services worldwide.
The company’s expected earnings growth rate for the next year is 10.2%. The Zacks Consensus Estimate for the next year has improved 0.3% over the last 60 days. The Zacks #2 Rank stock has climbed 43.2% year to date.
Today's Best Stocks from Zacks
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Click to get this free report QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report Charter Communications, Inc. (CHTR) : Free Stock Analysis Report Microsoft Corporation (MSFT) : Free Stock Analysis Report Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report NVIDIA Corporation (NVDA) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research