Betting on a stock is more like an attempt to hit the jackpot. But one needs a fair amount of luck for it to work every time. So, how to go about it? Instead of being a mute spectator and waiting for a convincing investment scenario, one should try and identify stocks that have the potential to outperform even when market conditions are not congenial.
Of late, major indices have fallen prey to weaker-than-expected March employment data, President Donald Trump’s airstrike against Syria and a decline in U.S. Manufacturing Purchasing Managers’ Index to 53.3 in March from 54.2 in February, signaling concern over the economic outlook.
Trump’s failure to keep his campaign promise of revamping U.S. healthcare was also a major setback and raised doubts as to whether he will be able to give shape to his revolutionary ideas that had led markets to new highs. Further, the notes of Fed’s March meeting unveiled that policy makers are contemplating on paring the balance sheet that has inflated to approximately $4 trillion of government- and mortgage-backed bonds. This did not go well down with investors.
We note that the Dow Jones Industrial Average, S&P 500 and NASDAQ declined 1.1%, 0.83%, and 0.15%, respectively, in the past month.
Where to Focus?
Target “Growth Stocks”. These are generally hot and flourishing stocks with earnings growth potential. Among the 16 Zacks categorized sectors, we are focusing on Retail-Wholesale today. The sector has gained 8.1% so far in the year and has comfortably outperformed the S&P 500 index that advanced 5.2%.
The recent rebound in oil prices, decelerating unemployment rate (4.5% in March) and a gradual improvement in the housing market signal that the economy is on a recovery mode. Undoubtedly, the retail sector presents itself as a lucrative investment hub amid such a backdrop. These factors are playing a crucial role in raising buyers’ confidence. U.S. consumer confidence leaped in March to the highest level since Dec 2000 amid growing labor market optimism.
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