Things are, unfortunately, not looking up for the U.S. stock market as of now. Outbreak of the deadly coronavirus to slowdown in domestic economic growth, everything is taking a toll on the stock market performance. What’s more, 2020 is an election year, which implies increased volatility.
In the view of this, investing in big-brand stocks seems prudent. After all, they have established business models and tend to draw consumers and investor attention even when the equity market is choppy.We shouldn’t forget that such stocks are financially stable enough to cash in on a market rebound.
Stock Market Plunges – But Why?
U.S. stocks are, undoubtedly, selling off sharply as worries mounted over the spread of the deadly coronavirus. The Dow and the broader S&P 500 already ended last week in the red, thereby snapping a two-week winning streak.
Millions of Chinese nationals and foreigners have been evacuated and flights have been canceled. After all, at least 170 people have died and almost 8,000 known to be infected, throughout China. What’s more, the disease has now started to spread outside China as well.
The virus has now raised quite an alarm, affecting respiratory organs, quite similar to SARS (severe acute respiratory syndrome). Lest we forget, SARS, which erupted in 2002, resulted in the death of 800 and triggered a severe economic slump that fettered global stocks.
What’s more, the U.S. economic growth has also slowed down last year to its slowest pace since 2016. According to the Commerce Department, the U.S. economy expanded 2.3% in 2019, well short of the 3% growth target set by the White House. To top it, the economy grew at a seasonally adjusted annual rate of 2.1% in the fourth quarter of 2019, matching the pace of the previous three months. Consumers pulled back on spending, while business investment fell considerably.
And how can we forget that the United States for most part of next year will face political uncertainty, eventually leading to gyrations in the stock market. But, it’s not just political risks that should bother investors. Rapid increase in government borrowing along with threat of more taxes and stringent regulations may jeopardize the U.S. stock market performance.
The U.S. tech sector, in the meantime, has helped the broader U.S. stock market climb north since the 2008 financial crisis and significantly outdo all other major equity markets. Thanks to the FAANG stocks and their adaptation of technologies, including AI and cloud computing, the tech sector has gained. But now, FAANG stocks are facing increasing threat of regulation, leading to make us believe that such stocks may not perform well in the near future. And with it, the broader stock market may underperform.
How to Play the Market Mayhem?
With the U.S. stock market going through a choppy phase, investing in big-brand companies seems judicious. These stocks will offer some respite as they boast stable cash flows. Needless to say, the value of brands is that they instantly convey information on quality, durability and consistency to consumers. These traits help such stocks counter market gyrations. And if the market pulls itself up in the near term, such companies will make the most of the positive trend as their products and services are widely accepted.
We have thus selected five of the best big-brand American stocks that have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chevron Corporation CVX engages in integrated energy, chemicals, and petroleum operations worldwide. The company operates in two segments, Upstream and Downstream. Chevron was founded in 1879 and is headquartered in San Ramon, CA. Chevron has been able to achieve a 40% reduction in its Permian Basin development and production costs since 2015.The company’s expected earnings growth rate for the next quarter is 38.9%.
Citigroup Inc. C provides various financial products and services for consumers, corporations, governments, and institutions. Citigroup was founded in 1812 and is headquartered in New York. A diverse business model, focus on core operations and streamlining of international businesses will continue to support Citigroup’s growth. Further, steady capital deployment is a positive.The company’s expected earnings growth rate for the current year is 14.1%.
The Coca-Cola Company KO, a beverage company, manufactures and distributes various nonalcoholic beverages. The company was founded in 1886 and is headquartered in Atlanta, GA. Coca-Cola’s portfolio gained from momentum in Coke Zero Sugar and other flavors. Third-quarter 2019 marked the eighth straight quarter of double-digit growth for Coke Zero Sugar. The company’s expected earnings growth rate for the next quarter is 8.3%.
Walmart Inc. WMT engages in the retail and wholesale operations in various formats. The company was founded in 1945 and is based in Bentonville, AK. The acquisition of the majority of Fox’s assets, impressive line-up of big budget movies, launch of direct-to-consumer service and robust visitor growth rate are Disney’s key catalysts. The company’s expected earnings growth rate for the next five years is 5.1%.
Apple Inc. AAPL designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories. The company was founded in 1977 and is headquartered in Cupertino, CA. Apple is benefiting from momentum in the Services business, strong adoption of Apple Pay and growing Apple Music subscriber base. The company’s expected earnings growth rate for the current year is 12.1%.
Today’s Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>
Citigroup Inc. (C): Free Stock Analysis Report
Coca-Cola Company (The) (KO): Free Stock Analysis Report
Apple Inc. (AAPL): Free Stock Analysis Report
Chevron Corporation (CVX): Free Stock Analysis Report
Walmart Inc. (WMT): Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
