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IMF Reaffirms Record-High Global Growth Rate in 2018: 5 Picks


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The International Monetary Fund (IMF) has reiterated its global growth projections for 2018 and 2019. The agency reconfirmed global growth rate in its latest World Economic Outlook ("WEO") report, published in July.

However, it observed that global economic expansion has become more uneven. Further, the agency warned that trade conflicts, higher oil prices and gradual appreciation of U.S. dollar is likely to impact global economy in the future.

In fact, a careful look into the report reveals several interesting points. The IMF has maintained growth projections of large economies like the United States, Canada and China compared with its April WEO report. Meanwhile, the agency has downgraded a number of countries such as the UK, the Eurozone, Japan, India, Brazil and Argentina. At this stage, it will be lucrative to invest in stocks of those countries that are likely to grow in future.

Growth Projections Remain Unchanged

The IMF has kept global growth of 2018 and 2019 unchanged at 3.9%. This increase of 0.1% from the pace in 2017 to 3.9% is in keeping with the last estimate released in January WEO report. Buoyed by a massive tax-cut initiated by the Trump administration, the U.S. economy is likely to grow at 2.9% in 2018 compared with 2.3% in 2017. Canada and China are likely to grow at 2.1% and 6.6%, respectively in 2018, same as April report.

However, Eurozone is now projected to grow at 2.2 in 2018, down from 2.4% in April projection. The UK's growth was revised from 1.6% to 1.4% and Japan's growth was revised from 1.2% to 1%. Moreover, India and Brazil suffered downward revision of 0.1% and 0.5%, respectively.   

Global Trade War Escalates

In March, Trump administration announced first phase of 25% U.S. tariffs worth $50 billion. On Jul 10, the U.S. government released a list of 10% tariffs on Chinese goods worth $200 billion. Trump had threatened China that his administration may consider the possibility of imposing new tariffs worth $300 billion if it retaliates against the U.S. tariffs. Moreover, since Jun 1, the U.S. government has imposed 25% tariff on steel and 10% on aluminum from the imports of Canada, Mexico and the European Union.

Oil Price Increases Due to Supply Concern

Strong international demand for crude oil, a tight global oil inventories and stabilization of oil production level has boosted oil price rally in the first half of 2018. Venezuela is plagued with economic instability, which is likely to take severe toll on the country's oil production till the end of 2018.Furthermore, the United States wants all countries to stop importing oil from Iran by Nov 4 or face the risk of U.S. sanctions. Notably, last month, the United States walked out of the Iran nuclear pact formed in 2015.

Our Top Picks

Even though the specter of trade related tensions threatens to disrupt the global growth story, the IMF has decided to maintain its global growth projections for 2018 and 2019. Tax cuts and higher export demand is likely to benefit growth of the United States. Picking stocks from the United States, Canada and China which are likely gain from higher growth looks prudent at this time. However, picking winning stocks may be difficult.

This is where our VGM Score comes in handy. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.

We have narrowed down our search to five stocks, each of which has either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score A or B. You can see the complete list of today's Zacks #1 Rank stocks here .

The chart below depicts price performance of our five picks in the last six months.

Domtar Corp. UFS headquartered in Fort Mill, SC, the company is a leading provider of fiber-based products including communication, specialty and packaging papers, market pulp and absorbent hygiene products. Domtar has a Zacks Rank #1 and a VGM Score of A. It has expected earnings growth of 39.2% for current year. The Zacks Consensus Estimate for the current year has improved by 10.4% over the last 60 days.

The Progressive Corp. PGR headquartered in Mayfield Village, OH, the company provides personal and commercial property-casualty insurance, and other specialty property-casualty insurance services in the United States. The Progressive has a Zacks Rank #1 and a VGM Score of A. It has expected earnings growth of 60.5% for current year. The Zacks Consensus Estimate for the current year has improved by 5.8% over the last 60 days.

Methanex Corp. MEOH headquartered in Vancouver, Canada, the company is engaged in the worldwide production and marketing of methanol. Methanex has a Zacks Rank #1 and a VGM Score of A. It has expected earnings growth of 36.5% for current year. The Zacks Consensus Estimate for the current year has improved by 7% over the last 60 days.

Magna International Inc. MGA headquartered in Aurora, Canada, the company is an independent supplier of original equipment components, assemblies, modules and systems and related tooling for cars and light trucks. Magna International has a Zacks Rank #2 and a VGM Score of A. It has expected earnings growth of 18.5% for current year. The Zacks Consensus Estimate for the current year has improved by 1% over the last 60 days.

ReneSola Ltd. SOL headquartered in Shanghai, China, the company is engaged in manufacturing solar wafers in mainland China. ReneSola has a Zacks Rank #2 and a VGM Score of B. It has expected earnings growth of 100% for current year. The Zacks Consensus Estimate for the current year has improved by 300% over the last 60 days.

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Renesola Ltd. (SOL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: MGA , MEOH , PGR , UFS , SOL



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