Wall Street Outperforms Global Markets In 2018: 5 Top Picks
Zacks Investment Research | Oct 30, 2018 09:16PM ET
Wall Street has witnessed its monthly worst performance this year in October. All three major stock indexes – the Dow, S&P 500 and Nasdaq Composite – are in the red this month. However, a closer look at global stock markets’ performance paints a different picture. Despite October stock market rout, U.S. stock markets are still providing positive returns year-to-date while all major international stock markets are witnessing significant downtrend.
A robust U.S. economy, strong consumer and business confidences and soaring corporate earnings driven by massive tax cut will act as near-term catalysts for Wall Street’s bull-run to continue in the rest of 2018. Consequently, it will be a prudent move to invest in stocks with favorable Zacks Rank and strong growth potential.
Wall Street Still Remains the Best Market to Invest
On Oct 30, the Wall Street recovered slightly from the slump it suffered in October. The Dow, S&P 500 and Nasdaq Composite advanced 1.8%, 1.6% and 1.6%, respectively. In fact, all three major stock indexes returned to positive territory year to date on Oct 30. So far in 2018, the Dow, S&P 500 and Nasdaq Composite returned 0.6%, 0.3% and 3.7%, respectively.
In comparison with U.S. stock indexes, internationally recognized stock indexes have performed rather poorly. Year to date, Stoxx Europe 600, UK: FTSE 100, Japan: Nikkei 225 and China: Shanghai Composite is down 7.3%, 7.2%, 3.7% and 23.3%, respectively.
Robust U.S. Economic Fundamentals
The U.S. GDP’s recorded growth of 3.3% in the first nine months of 2018, surpassing the target of 3% set by President Trump. On Oct 29, the Department of Commerce reported that U.S. consumer spending increased $53 billion or 0.4% in September, marking the seventh consecutive month of gain by this margin. Notably, consumer spending constitutes nearly 70% of the U.S. GDP.
On Oct 30, the Conference Board reported that U.S. consumer confidence for the month of October was pegged at 137.9, the highest reading since September 2000. The future expectations index — reflecting what Americans think the economy will look like in the next six months — increased to 114.6 from 112.5, indicating strong growth at least up to first quarter of 2019.
Current unemployment rate of 3.7% is at its lowest since December 1969. Core PCE inflation – the Fed’s favorite gauge of inflation – rose 0.2% but its year-over-year growth rate remains flat at 2%.
Healthy Earnings Data
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U.S. corporates earned record high profits in the first two quarters of 2018. As of Oct 30, 279 S&P 500 members have reported third quarter earnings. Total earnings for these companies are up 22.3% year over year on 8.4% higher revenues. For the third quarter, total earnings of S&P 500 companies are likely to be up by 22.4% on 7.5% higher revenues. (Read More: Zacks Investment Research
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