Post-Midterm Spell Days Good Time for Stocks: 5 Picks – November 7, 2018

Traditionally, the stock market tends to rise after a midterm election irrespective of the outcome. In fact, in the current situation where the Democrats have taken control of the House of Representatives while GOP retained the Senate, stocks are poised to perform even better. To top it, the U.S. economy is in its shape and trade war fears have somewhat subsided.

Given such bullishness, investing in sound stocks can make the most of the current scenario seem cautious.

After Midterms, Stocks Could Jump 20%

According to The Goldman Sachs Group, Inc. (GS – Free Report), the S & P 500's returns on an average has always been improved in November especially after midterms, according to data going back to 1970. 1.08% released during November in an off year.

The current split Congress, in fact, further bodes well for the stock markets' return in the near future. In the present situation, where Democrats control the House and the Senate, the S & P 500 is largely expected to gain 20% on average in the following year. Meanwhile, if the Republicans had won the House and Democrats the Senate, then the S & P 500 was expected to gain 3%.

However, if we still ignore the outcome, the equity market is likely to gain momentum post-midterm. Per S & P Capital IQ, the S & P 500 has risen on average 15.3% in the six months following midterm election in the third year of a presidency, which is incidentally this year. The research also showed that the frequency of advance (FoA) for this occurrence was 94% of the overall time period of Oct 31, 1944-Sep 29, 2014.

(Source: S & P Capital IQ)

Stephen McBride, the editor of RiskHedge report, also said that stocks have climbed an average of 17% in the year after a midterm election since 1946. McBride too acknowledged that it is the third year of a strong year for the stock market.

The stock market, by the way, historically gains in the November-through-May period or so-called "winter" months, while markets have been more or less flat during the "summer" months (May-October). For instance, the Dow Jones has registered an average gain of 7.5% during the month-to-month period, while the blue-chip index yielded to 0.3% in the May-October period.

Healthy Economic Growth, Positive U.S.-China Trade Talks

But, why just rely on historic trends? The U.S. economy is doing well and it should eventually help the stock market gain traction. In the last two quarters, the U.S. economy recorded the fastest six-month growth in the United States and was on track to hit the Trump administration's annual growth target of 3%. If that happens, it would be the best annual performance since 2005, two years before the Great Recession.

The U.S. economy has a boost in the third quarter, with the GDP increasing at an annualized rate of 3.5%, for the U.S. Commerce Department. In fact, the country's total output of goods and services followed by a stronger 4.2% growth in the second quarter.

On the geopolitical front things are looking up as well. Trump recently had a "very good conversation" with President Xi Jinping of China. Trump tweeted that trade talks with China were "moving along nicely" ahead of face-to-face talks between the two superpowers at the G20 summit in Argentina later this month. Beijing, in response, said that they are also ready for talks with the US to resolve trade issues. Needless to say, the United States and the United States have long been involved in this process.

5 Top Picks

With strong growth, it seems prudent at the moment.

With the help of our new Style Score System, we have thus short-listed Zacks Rank # 1 (Strong Buy) stocks with a Growth Style Score of A. Our research shows that stocks with a Growth Style Score of A when combined with a solid Zacks Rank offers the best investment opportunities in the growth investing space.

Heidrick & Struggles International, Inc. (HSII – Free report) provides executive search, culture shaping, and leadership consulting services.The Zacks Consensus Estimate for the company's earnings rose 11.4% in the last 60 days. The company's annual growth rate is 105.5% compared with the Staffing Firms industry's projected rise of 22.2%.

KEMET Corporation (KE M – Free Report) manufactures and sells passive electronic components.The Zacks Consensus Estimate for the company's earnings surged 34.1% in the last 60 days. The company's annual sales are expected to increase by 15.9%.

Methanex Corporation (MEOH – Free Report) produces and sells methanol. The Zacks Consensus Estimate for the company 's earnings rose 5.6% in the last 60 days. The company's annual sales are expected to be 63.7% compared with the Chemicals – Diversified industry's projected rise of 13.4%. You can see the complete list of today 's Zacks # 1 Rank stocks here.

The Chefs' Warehouse, Inc. (CHIEF – Free Report) distributes specialty food products in the United States. The Zacks Consensus Estimate for the company's earnings rose 1.3% in the last 60 days. The company's expected earnings growth is 77.3% compared with the Food – Miscellaneous industry's projected rise of 4%.

Clean Harbors, Inc. (CLH – Free Report) provides environmental, energy, and industrial services in North America. The Zacks Consensus Estimate for the company 's earnings climbed 20.2% in the last 60 days. The company's sales are expected to grow by 28%.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power can soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) can be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

The company is one of the largest companies in the world.

It's not the one you think.

See This Ticker Free >>