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5 Top-Ranked Winners From S&P 500's Record-Busting 1H19

U.S. stocks ended the first half of the year on an encouraging note, with both the Dow and S&P 500 notching up record gains. Broader benchmarks also created new milestones during the month of June, which helped to push year-to-date gains into record territory.

A strong U.S. economy seems to have negated most investor concerns during the period. Robust fundamentals were supported by the Fed, which stepped in to allay investor concerns at several points. Recently, the central bank indicated that it is likely to take a softer view on rates as the year progresses.

Meanwhile, trade talks are set to resume following a meeting between presidents Trump and Xi at the G20 summit in Japan. The prospect of a near-term trade deal and a rate cut later this year are likely to boost investor sentiment. This is why it makes sense to invest in S&P 500 stocks, which registered strong gains during the first half of the year.

S&P 500, Dow Create New Milestones, Economy Shines

In June, the S&P 500 gained 6.9%, its best return for the month since 1955. The broader benchmark is also up 17.4% year to date, its best gain for the period since 1997. The Dow posted its best June gains since 1938, adding 7.2%. The blue-chip index also increased 14% over the first half of 2019.

But the path of such gains was not altogether smooth. Trump’s trade tactics led to heavy losses in May. During the month’s opening days, Trump threatened to levy fresh tariffs on Chinese goods, spreading panic among investors. He went on to engage in a trade skirmish with Mexico and then issued an order effectively barring Huwaei sales. Predictably, the S&P 500 closed the month 6.6% lower. 

Ultimately, the economy came to Wall Street’s rescue, lending a hand to deal-making. The total value of deals jumped 20% from last year to hit $1.1 trillion. This is the first time ever that domestic deal volumes have exceeded $1 trillion during the first half of a year. Fresh data shows consumer spending and income exceeding estimates, which likely means that the trend will continue.

Rate Cut, Trade Deal Crucial for Future Gains

The key to future gains lies with the Federal Reserve and presidents Trump and Xi. June’s gains were largely a product of indications from the Fed that it was likely to adopt a softer policy approach later this year. The central bank said that it would “act as appropriate” to preserve the current economic momentum. In the process, they have raised hopes for a July rate cut significantly.

Meanwhile, presidents Trump and Xi agreed to restart trade talks after their meeting at the G20 summit in Japan last week. Trump also said no new tariffs would be levied on Chinese items. Further, he agreed to ease restrictions on Huwaei, in order to cool down trade tensions. Trump is likely to hold off from fresh tariffs until presidential elections are concluded in 2020.

Our Choices

The S&P 500 posted record gains during the first half of 2019, boosted largely by a strong U.S. economy. A softer policy stance from the Federal Reserve has also enthused investors and the central bank’s actions are largely responsible for June’s strong gains. Given that there is a strong chance of a near-term rate cut even as trade tensions decline, gains are set to continue in 2H19.

Investing in S&P 500 stocks which registered searing gains in 1H19 looks like a prudent option. We have narrowed down our search based on a Zacks Rank #1 (Strong Buy) and other relevant metrics. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chipotle Mexican Grill CMG, together with its subsidiaries, operates quick-casual and fresh Mexican food restaurant chains.  

Chipotle Mexican Grill’s projected growth for the current year is 43.6%. Its earnings estimate for the current year has improved by 0.1% over the past 30 days. The stock has gained 69.7% year to date.

Global Payments Inc. GPN has been in the payment technology services business since 1967.

Global Payments’ projected growth for the current year is 16.6%. Its earnings estimate for the current year has improved by 0.2% over the past 60 days. The stock has gained 55.3% year to date.

Arconic Inc. ARNC, formed through the separation of aluminum giant Alcoa Inc., is a global leader in multi-material, precision engineered products and solutions for a variety of industries.

Arconic’s projected growth for the current year is 32.4%. Its earnings estimate for the current year has improved by 3.4% over the past 60 days. The stock has gained 53.1% year to date.

Roper Technologies ROP designs, manufactures and distributes medical and scientific imaging products and software, radio frequency products, services and application software, industrial technology products and energy systems, and control products and solutions.

Roper Technologies’ projected growth for the current year is 9.4%. Its earnings estimate for the current year has improved by 1.8% over the past 30 days. The stock has gained 37.4% year to date.

American International AIG is a holding company, which through its subsidiaries, is engaged in a range of global insurance and insurance-related activities.

American International’s projected growth for the current year is more than 100%. Its earnings estimate for the current year has improved by 12.7% over the past 60 days. The stock has gained 35.2% year to date.

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