US Economy Had A Banner 2018: Top 5 Gainers
Zacks Investment Research | Mar 01, 2019 07:05AM ET
The U.S. economy finished one of the best years of a decade-long economic expansion, growing at a commendable pace in the fourth quarter and defying slowdowns elsewhere in the world.
Pick-up in consumer spending and an uptick in business investment in software, research and equipment boosted economic growth. Consumer outlays in particular improved on a steady job market, healthier household finances and tax cuts. Hence, it seems judicious to invest in areas where consumers have led the way.
GDP Matches Fastest Growth Since Recession
According to the Bureau of Economic Analysis, U.S. GDP expanded a 2.6% annual pace in the fourth quarter of 2018. It was way more than analysts’ expectations of a 1.9% growth rate. The U.S. economy had expanded at a solid 3.4% clip in the third quarter, which followed an even better 4.2% growth in the second quarter.
A slight drop at the end of 2018, however, kept the economy from clocking 3% annual growth rate for the first time since 2005. But, GDP for the full year did match the growth rate attained in 2015, which was the highest since the 2007-2009 Great Recession.
The fourth quarter growth rate is certainly laudable. After all, such steady growth was achieved despite slowdown in global economic growth, consistent turbulence in the financial markets, trade-related disputes with China and the longest partial government shutdown in history.
In fact, the government shutdown that began shortly before Christmas may have cost the economy 0.1 percentage point of growth in the fourth quarter, added the Bureau of Economic Analysis.
Consumer Spending Drives GDP, Business Investments Ramp Up
Consumer spending boosted economic growth. Consumer outlays grew a healthy 2.8% in the fourth quarter as Americans splurged on cars and trucks, health care, clothes and financial services, among other things. Disposable personal income, by the way, increased $225.1 billion in the fourth quarter, compared with an increase of $190.6 billion in the preceding quarter.
Spending improved mostly due to a strong jobs market, household income gains and tax cuts. According to the Bureau of Labor Statistics, employment gains in 2018 turned out to be the strongest in the last three years. In fact, if we consider December’s job additions of 222,000, November’s 196,000 and this January’s 304,000, the labor market has posted the best three-month stretch during an economic expansion dating back nine-and-a-half years ago.
(Source: Bureau of Labor Statistics)
The $1.5-trillion tax cut package that Trump got Congress to pass last year also did put a lot of money in consumers’ pocket. The tax bill trimmed the ultra-rich individual tax bracket from 39.6% to 37%, while the middle class has been excused from paying hefty taxes.
In the meantime, companies increased investments in equipment and product research, offsetting the drop in investments in new construction. Business investment climbed 7% in the year, while investments in software, research & development increased 7.7%, surpassing the 7.5% gain in 2016 — the best since 2000’s 9.5%.
5 Solid Choices
As consumers bump up their spending on cars, healthcare and garments, to name a few, investing in stocks from such areas seems prudent. Significant increase in expenditure on software, research and development also calls for investing in such spaces.
We have, thus, selected five solid stocks from the aforesaid areas that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy) and also a Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.