The novel coronavirus has induced unprecedented volatility in the financial markets since the beginning of this year, prompting both small and large businesses to brood over their ability to keep going once the crisis is over. Investors also hesitated to put their money into stocks, unable to understand which direction the broader markets may trend in the weeks ahead.
However, one must remember in such trying times that the current situation is all but permanent. This temporary weakness induced by the novel coronavirus, like all things bad, shall pass. Keeping this in mind, let us delve deeper and consider a few stocks that are apt for investment despite the gloomy scenario.
Quarantine Measures Are Yielding Results
The deadly disease that originated in Wuhan, China, about three months ago affected more than 549,000 lives globally as of Mar 27. Fears over this highly infectious virus sent several countries on lockdown, hoping that less contact among people may slow the contagion.
This is because although top biotechnology companies, such as Moderna, Inc. MRNA and Regeneron Pharmaceuticals, Inc. REGN are working fast toward an experimental vaccine, the results from the initial dosing of Moderna’s antidote will take at least two months to affirm, as Bloomberg reported. In such a scenario, shutting down cities, towns and localities is the safest bet for governments globally.
In fact, this quarantine actually yielded affirmative results in China and South Korea, per The New York Times. Both countries suffered extensively from the viral attack but life in these two South Asian countries is already limping back to normalcy, courtesy of some strict quarantine measures imposed earlier. Given that the United States and several other countries are also down the same path right now, one may expect the COVID-19 condition to be under control a few months from now.
Current Monetary and Fiscal Stimulus to Boost Markets
Enough monetary and fiscal measures have been induced in the economy to propel a turnaround in the financial markets. The country’s central bank did its share of monetary easing by cutting rates twice this year in close succession. Its latest rate cut on Mar 15, which put the benchmark rates to near-zero, is already yielding results in the arena of mortgage rates.
The Fed’s current rates are in the 0-0.25% range, which lowers the borrowing costs for both individuals and businesses, hit hard by the pandemic. After all, as more consumers gain access to interest-free cash, the more they are likely to increase their spending and get the economy gather steam again.
The Senate on Mar 25 also approved an astounding $2-trillion stimulus package to rescue the economy from further damages in the coming months. In a historic voting ratio of 96-0, the legislation passed the proposed financial aid with overwhelming bipartisan support in the Senate. The bill is now headed to the House for a vote. President Donald Trump already indicated that he will signal the bill green.
The package reflects of the largest emergency support program in American history. Among the key elements of this initiative, a sum of $250 billion will be paid to individuals and families; $350 billion is allotted to small business loans; $250 billion is reserved for unemployment insurance benefits and an amount worth $500 billion is meant to be spent on loans to bail out the distressed businesses.
Stagnant Consumer Demand to Rise Ahead
Albeit activities like purchasing consumer discretionary products and visiting recreational centers halted altogether right now, these could witness a sharp resurgence once this temporary phase of quarantine comes to an end.
In such a scenario, investors looking for an entry point in the markets could consider investing in high-quality companies that have outperformed the broader markets consistently. It is only in recent weeks that these stocks showed a dip because of the downtrend gripping the Wall Street post the COVID-19 outbreak.
3 Stocks to Buy
We therefore narrowed down our recommendation to three stocks that have outperformed the broader S&P 500 in the past year. Not only are these three companies large-capitalization ones, but each of those holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Amazon.com, Inc. AMZN have gained 10.3% in the past year, clearly outperforming the broader S&P 500 index’s 7.5% decline. The Zacks Consensus Estimate for Amazon’s current-year earnings has moved 4.8% north in the past 60 days. The company’s expected earnings growth rate for the current year is 18.9%. Amazon belongs to the Zacks Internet - Commerce industry.
Shares of Microsoft Corporation MSFT have gained 33.6% in the past year. The Zacks Consensus Estimate for Microsoft’s current-year earnings has moved 5.2% north in the past 60 days. The company’sexpected earnings growth rate for the current year is 18.7%. Microsoft belongs to the Zacks Computer - Software industry.
Shares of Advanced Micro Devices, Inc. AMD have gained 89.6% in the past year. The Zacks Consensus Estimate for Advanced Micro Devices’ current-year earnings has moved 1.9% north in the past 60 days. The company’s expected earnings growth rate for the current year is 71.9%. Advanced Micro Devices belongs to the Zacks Electronics - Semiconductors industry.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
Click to get this free report Microsoft Corporation (MSFT) : Free Stock Analysis Report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Regeneron Pharmaceuticals, Inc. (REGN) : Free Stock Analysis Report Moderna, Inc. (MRNA) : Free Stock Analysis Report Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research