2019 Was A Tough Year But These 5 Stocks May Rebound In 2020

It is turning out to be an epic year for U.S. stocks. The equity market’s relentless rally has catapulted key indexes to new heights, which are headed for their best year since 2013.

The S&P 500 stock index – the broadest measure of the equity market – has added as much as 28.6% to its value so far this year (as of Dec 20, 2019). Other major market indexes also are on course to deliver solid gains. The tech-heavy Nasdaq composite and the 30-company Dow Jones industrial average have increased a respective 34.5% and 22% year to date. In fact, the S&P 500, Dow and Nasdaq notched record closing highs on Friday.

What’s Driving the Rises?

The S&P 500, for its part, witnessed broad-based gains, with all 11 sectors rising, led by technology, which is up nearly 47%.

Let’s see what went right for the markets in 2019. It’s fairly simple: investors have driven up equities on evidence of economic growth. Another big catalyst was the preliminary U.S.-China trade deal.

Investors cheered the Federal Reserve’s decision to cut rates thrice this year – in July, September and October – coupled with the central bank’s assertions of a robust labor market and strong economic activity. Soaring job growth and a 50-year low unemployment rate have added to the optimism. Moreover, factory production is rebounding, domestic homebuilding market is taking off, while the increase in consumer spending suggests solid momentum for the overall economy. Finally, a sharp fall in the U.S. trade deficit should contribute to the fourth quarter GDP.

The recent agreement on a phase one trade deal between the two biggest economies further boosted the market sentiment. The development – coming after almost two-years of wrangling – is seen to prop up the demand outlook and revive global economic growth.

What Will 2020 Hold for the Markets?

While 2019 was an exceptional year, going ahead, the odds of an extended run in stocks next year also appear to be good.

The bull market turned 10 this year in March and Wall Street pundits expect the rally to continue in 2020, on the back of an accommodative monetary policy adopted by the Federal Reserve as well as strong fundamentals of the U.S. economy.

Meanwhile, the OPEC+ group announced cutting output by as much as 500,000 barrels per day from Jan 1 for three months to end a supply glut and prop up prices. This is in addition to the existing production curbs of 1.2 million barrels per day by OPEC, Russia and other non-member oil producers. The cartel’s renewed supply cuts lifted energy and commodity companies and helped give the markets another lift.

Certain Underperformers to Bounce Back Next Year

While the markets this year reached new highs, several stocks underperformed. There are chances that some of these stocks might rebound in 2020 given the favorable factors and their fundamental strength.

However, it’s not easy to pick these hidden gems among such underachieved stocks. Hence, we have taken the help of Zacks Stock Screener to make this task relatively simpler.

We have shortlisted stocks that underperformed the S&P 500 so far this year with a market capitalization of at least $1 billion and a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see Zacks Investment Research

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Written By: Zacks Investment Research