5 Top Momentum Stocks In August Despite Market Mayhem

Wall Street is on the verge of completing its most-disastrous month so far this year. Volatility resurfaced in Wall Street since the beginning of August after two months of bull run.

A less-than-expected dovish monetary stance taken by the Fed in its FOMC meeting at July end, heightened tariff war between United States and China, the global economic slowdown, especially in manufacturing and, exports together with frequent inversion of the main yield curve of the U.S. Treasury Notes, resulted in a stock market rout.

The three major stock indexes ---- the Dow, the S&P 500 and the Nasdaq Composite --- have so far lost 3.1%, 3.1% and 3.9%, respectively, in August. Despite these negatives, a few stocks have surged in the past month and still carry strong momentum for further upside.

U.S.-China Trade Conflict Intensified

On Aug 23, China announced that it will impose 5% to 10% tariff on another $75 billion of U.S. goods in two tranches, on Sep 1 and Dec 15. Additionally, a 25% tariff on U.S. auto products and auto parts will be imposed effective Dec 15.

In retaliation, President Donald Trump decided to raise tariff to 30% from the existing 25% on $250 billion Chinese goods. Moreover, he also raised the tariff from 10% to 15%, which is to be levied on an additional $300 billion of Chinese exports effective Sep 1. Consequently, tariff on $550 billion Chinese goods will cover total U.S. imports from China per annum.

Furthermore, Trump tweeted by issuing an order to U.S. companies to look for an alternative to China for their operations including returning home. President Trump also hinted that prolonging the U.S.-China trade conflict can lead to the imposition of national emergency, though not immediately.

Global Headwinds

The GDP of the Eurozone economy as a whole declined to 0.2% in the second quarter compared with 0.4% in the first. Notably, Germany, the fourth-largest economy in the world, witnessed a 0.1% contraction in its second-quarter 2019 GDP, the first time since the third quarter of 2018.

Germany’s industrial output in July also declined 5% year over year. The German Ifo Institute reported that business sentiment in July came in at a reading of 94.3, the lowest level since November 2012.

The second-quarter 2019 GDP of the U.K. contracted 0.2% for the first time since late 2012. The manufacturing sector declined 2.3% in the second quarter, marking its biggest quarterly fall since the first quarter of 2009.

Moreover, U.K. Prime Minister Boris Johnson decided to suspend the parliament until Oct 14, raising the concern of no-deal Brexit as Britain is scheduled to exit from the European Union on Oct. 31.

In China, industrial output grew 4.8% in July, marking its lowest growth in more than 17 years. Retail sales in China were up 7.6% in July, reflecting the second-lowest rate of growth since 2003. Meanwhile, political unrest for democracy heightened in Honk Kong, the financial hub of Asia. Hong Kong’s close financial proximity with Europe and several Asian emerging markets may result in global financial turmoil if political unrest continues for an indefinite time period.

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5 Top Momentum Stocks Flying High in August

We have narrowed down our search to five such stocks, which popped in August and still have strong momentum. Each of our picks carries a Zacks Rank #1 (Strong Buy) and a Zacks Zacks Investment Research

Written By: Zacks Investment Research