U.S. Household Net Worth Hits Record High in Q4 2020: 5 Picks
Net worth of American households reached a fresh all-time high in the third quarter of 2020 despite the resurgence of coronavirus. On Mar 11, the Fed reported that household net worth surged $6.9 trillion or 5.6% in fourth-quarter 2020 from the third quarter to reach $130.2 trillion.
Year over year, net worth of Americans jumped 10%. The value of equities increased nearly $4.9 trillion while the value of real estate held by households rose around $915 billion. Moreover, net savings of U.S. citizens soared to a record high $2.85 trillion at the end of 2020.
The U.S. economy grew 4.1% in the fourth quarter of 2020 despite the resurgence of COVID-19 infections. Moreover, investors were skeptical about the outcome of the U.S. Presidential election, uncertainties regarding a fresh round of fiscal stimulus and unavailability of vaccines during a large part of last quarter.
In spite of facing these problems, which forced the U.S. economy to operate at a sub-optimal level in the last 10 months, the devastation was not as severe as expected earlier. Defying all hurdles, the U.S. economy has kept on growing although well below the pre-pandemic level.
Reasons for Surging Household Net Worth
Meanwhile, the U.S. stock markets witnessed a V-shaped recovery in 2020 that has helped Wall Street to confirm a new bull market after exiting a coronavirus-led short bear market.
The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite —rallied an astonishing 68%, 71.4% and 94.4%, respectively, from their recent lows recorded from Mar 23 to Dec 31. Furthermore, the Dow, the S&P 500 and the Nasdaq Composite — climbed 10.2% 11.7% and 15.4%, respectively in the fourth quarter.
On the other hand, the housing market has remained robust primarily due to record-low mortgage rates. The Fed adopted an ultra-dovish monetary stance and reduced the benchmark interest rate to as low as 0-0.25% in March.
The central bank later confirmed that it will maintain this range of the benchmark lending rate until all economic variables return to the pre-pandemic level. The low rate of market interest rate significantly reduced mortgage rates, enabling consumers to buy houses. The strong demand has strengthened the real estate sector.
The FDA has approved three COVID-19 vaccines so far. On Feb 11, President Biden said that by the end of the summer, the United States will have adequate doses of COVID-19 vaccines to administer to more than 300 million citizens. The speeding up of the vaccination process implies chances of a faster-than-expected reopening of the U.S. economy. Reopening of the economy with the easing of the pandemic will significantly ramp up business activities and employment.
In January, personal expenditure rose 2.4% — the first gain in three months and the biggest monthly increase since June 2020. This was primarily due to $900 billion fiscal stimulus injected by the government in December 2020. The package included one-time cash payments of $600 and a special weekly unemployment benefit of $300.
President Joe Biden signed the new $1.9 trillion coronavirus-aid package on Mar 12. Per the bill, eligible U.S. citizens will receive a $1,400 check payment in addition to $1,400 for any dependent. Moreover, the extra amount in unemployment benefits would be increased to $300 a week and the period will be extended up to Sep 6. The fresh stimulus is likely to significantly boost pent-up demand for U.S. consumers.
Our Top Picks
We have narrowed down our search to five U.S. corporate behemoths (market capital > $80 billion) as these companies have a well-established business model and powerful brand value. These stocks have skyrocketed more than 30% year to date with more upside potential for 2021 and have witnessed solid earnings estimation revisions in the last 7 to 30 days.
Moreover, all these stocks are regular dividend payers providing an important income stream during a market downturn. Finally, each of our picks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Exxon Mobil Corp. XOM explores and produces crude oil and natural gas in the United States, Canada/Other Americas, Europe, Africa, Asia, and Australia/Oceania. It operates through the Upstream, Downstream and Chemical segments.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 12.2% over the last 7 days. It has a current dividend yield of 5.62% and the stock has jumped 50.3% year to date.
Chevron Corp. CVX is one of the largest oil and gas companies in the world with operations that span almost every corner of the globe. It operates in two segments, Upstream and Downstream.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 25.3% over the last 7 days. It has a current dividend yield of 4.63% and the stock has advanced 32.1% year to date.
Deere & Co. DE manufactures and distributes farm equipment worldwide. It operates through three segments: Agriculture and Turf, Construction and Forestry, and Financial Services.
The company has an expected earnings growth rate of 82.5% for the current year (ending October 2021). The Zacks Consensus Estimate for the current year has improved 20.5% over the last 30 days. It has a current dividend yield of 0.82% and the stock has rallied 37.3% year to date.
Capital One Financial Corp. COF is primarily focused on consumer and commercial lending as well as deposit origination providing various financial products and services in the United States, the United Kingdom, and Canada. It operates through three segments: Credit Card, Consumer Banking and Commercial Banking.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 0.3% over the last 30 days. It has a current dividend yield of 1.21% and the stock has appreciated 34% year to date.
ConocoPhillips COP produces transports and markets crude oil, bitumen, natural gas, liquefied natural gas and natural gas liquids worldwide. The company has an expected earnings growth rate of more than 100% for the current year.
The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 32.3% over the last 7 days. It has a current dividend yield of 2.91% and the stock has climbed 48% year to date.
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