5 Top-Ranked U.S.-Focused Stocks To Defy Volatility

On Jan 27, Wall Street plunged along with several major stock markets globally as investors' remained highly concerned about the impact of coronavirus on China and the global economy.

The Chinese health authority confirmed that already 4,515 people are infected among whom 106 have died. The United States, Australia, European region, Japan, South Korea, India and several Middle East countries have confirmed positive cases of coronavirus.

Stock Markets Plummet Globally

On Jan 27, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — plunged 1.6%, 1.6% and 1.9%, respectively. For the Dow and the S&P 500, this represented the worst daily drop since Oct. 2, while the Nasdaq Composite declined the most since Aug 23.

The Dow continued its losing streak for five straight days, posting its longest losing streak since August. The S&P 500 recorded its first single-day decline of more than 1% after 74 consecutive trading days.

Internationally, Japanese Nikkei 225 shed 2%, the German DAX lost 2.6%, France’s CAC 40 tumbled more than 2% and the pan-European Stoxx 600 Index tanked 2.3%. Meanwhile, the CBOE Volatility Index (VIX) — popularly considered as the best volatility gauge of Wall Street — jumped 25.1% to 18.23.

U.S. Economy Remains Stable

A series of recently released economic data for December like retail sales, housing and manufacturing output confirmed U.S. economic stability and clearly indicates that the historically longest expansionary phase is here to stay.

The recently signed phase-one trade deal between the United States and China has significantly cooled down the nearly two-year old tariff war. The interim deal will at least help in restoring U.S. business confidence and global economic growth.

The Fed chair has reiterated his commitment to do whatever is needed to support economic expansion and not raise interest rate until inflation, which is currently just 1.6%, crosses the Fed’s target level of 2%. Unemployment rate is currently at the lowest level in 50 years.

Moreover, U.S. GDP grew more than 2% in the first three quarters of 2019 and is expected to grow more or less same in the fourth quarter. Corporate profits are estimated to take a positive turn from the beginning of 2020.

Why U.S.-Focused Stocks?

Investors are concerned that the outbreak of coronavirus will hurt sales of U.S. multinational companies as their products will be vulnerable in international markets. An expected decline in China's economic growth will delay global economic recovery. U.S. exports — especially the manufacturing and agricultural products — will face the brunt of it.

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On the other hand, domestic-business-oriented companies are mostly immune to any external shock since the United States is the lone market for their products. Moreover, a stable and growing U.S. economy will support demand for their products. This will help them to outperform the broader market defying extreme volatility.

Our Top Picks

At this juncture, investment in domestic-business-focused stocks will be fruitful. We have narrowed down our search to five such stocks with strong growth potential. Each of our picks carries a Zacks Rank #1 (Strong Buy). You can seeOriginal post