Forget Geopolitics, Turn To Q1 Earnings With 5 Winning Stocks

Astute investors have turned their focus from the latest White House tweets to Q1 corporate profits. Strategists believe that tax benefits and pickup in deal activity will aid earnings. Wall Street has always shown an uptrend after earnings release in the last five years.

Geopolitical crises like the prospects of a Western strike on Syria and trade war tensions have receded somewhat. Mounting military tensions, historically, has had no effect on markets but on humans. In addition, Trump has toned down some of the trade war banters with China, by categorically stating that the nations may not end up imposing the proposed tariffs.

Since Q1 earnings is expected to drive equity gains and talks of firing missiles and trade war rhetoric take a back seat, investing in sound growth stocks that can make the most of the first-quarter earnings season seems judicious.

Investors Shouldn’t Fear a Syria Strike

Escalating concerns over the Middle Eastern countries have been weighing on investors’ mind for quite some time now. Trump had twitted that a missile attack on Syria was very much in the cards after Syrian President Bashar al-Assad sanctioned chemical weapon attack on civilians in Damascus over the weekend. Russia had retaliated, saying that it will fend off any U.S. missile.

Such a concern, however, ratcheted down lately after Trump suggested that a military strike on Syria may not be imminent. He tweeted “never said when an attack on Syria would take place. Could be very soon or not so soon at all!”

Investors should also shrug off fears of a U.S. missile strike on Syria. Historically, such military attacks have limited impact on the stock market, especially over the long run. Jeffrey Kleintop, the chief global investment strategist at Charles Schwab (NYSE:SCHW) & Co, said that immediately after a military strike markets tend to lose around 0.2% to 0.3%, but there is nothing exceptional about it. Such a movement happens almost daily during normal trading sessions.

Trump Defuses Trade War Chatter with China

Trump had earlier, in the light of China’s “illicit trade practices,” doubled down on China tariffs, ratcheting up possibilities of a U.S.-China trade war. He had ordered the U.S. Trade Representative to consider imposing tariffs on additional $100 billion in Chinese imports. China in turn was widely expected to adopt a similar protectionist move and heighten global concerns of a tit-for-tat trade battle.

This had resulted in a lot of uneasiness, with most sectors expected to suffer collateral damage. After all, increased trade conflicts dent corporate profits and impede economic expansion. But, for now, Trump said that the United States may be able to avoid a potential trade conflict with China provided Beijing is willing to give more American products access to its market. Eventually, he believes that the countries will end up imposing no tariffs at all.

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Q1 Earnings Takes Center Stage

While geopolitical jitters wane, investors anticipate a strong earnings season to lift Wall Street. Banks have already started to pop ahead of earnings. For the Finance sector, of which the Major Banks industry is the biggest earnings contributor, total Q1 earnings are expected to be up 19.2% from the same period last year on 4.5% higher revenues. This would follow 0.6% earnings growth in the preceding quarter on 4% higher revenues (read more: Original post

Written By: Zacks Investment Research