Trading action was relatively quiet during the holiday-shortened week. The broader U.S. market averages closed out November with a half-day of trading on Friday, to post their best monthly performance since June.
This momentary lull in the action gives us an opportunity to preview what we’re expecting for the new year.
2019 has offered plenty of surprises so far; including 3 rate cuts by the Federal Reserve and 20%-30% gains for U.S. stocks across the board, despite the fact that S&P 500 earnings declined year-over-year in the third quarter.
With stock market averages at all-time highs, here’s what we’re looking for in the new year.
Trade Deal Coming?
One item that will likely set the tone for trading in 2020, is the ongoing trade dispute between China and the U.S. A year ago, most market watchers would not believe this new “cold war” would still be going on, but here we stand.
A “Phase One” deal was reportedly reached by the two sides back on Oct. 11, but has yet to be signed. In the meantime, U.S. tariffs on $160 billion of Chinese goods (including consumer electronics) are scheduled to go into effect on Dec. 15.
As it currently stands, most geo-political observers do not expect a full deal between the two countries before the U.S. Presidential election in November 2020.
Speaking of elections, politics and investments don’t usually mix, but investors cannot ignore the fact that 2020 is a U.S. Presidential election year.
According to the Stock Traders’ Almanac, the Dow Jones Industrial Average has averaged a gain of 10.2%, when a sitting President runs for re-election. History suggests that we can tally this one for the Bulls.
Fed Off the Table
It’s hard to believe, since it feels like we’ve been on constant Fed Watch the past couple of years, but the FOMC may be largely out of the picture in 2020.
Fed funds futures are currently pricing in just a 68% chance of an interest rate cut in next year. Even then, traders are betting that Chairman Paulson and Co. likely won’t take any action until next September.
Growth Trumps All
What does all of this mean for investors in the new year? No matter what your investments did last year or who’s in the White House, one thing that never goes out of style is growth.
However, a year after stocks posted 20% to 30% gains, finding growth at a reasonable price is becoming a more difficult task, especially as earnings growth wanes.
We know deciding what and when to buy can be challenging for any investor. Even so, the fact remains that attractive investments are out there, if you’re willing to dig a little deeper.
One such under-the-radar name that has a little bit to offer both growth and value investors is worth a closer look and is our Stock of the Week below…
Stock of the Week: eHealth Inc. (EHTH)
eHealth is an online health insurance marketplace serving individuals, families and small businesses in the U.S. Even with its 140% year-to-date gain, several members of the Street say this growth story is just getting started.
First and foremost, EHTH just had a solid third quarter. Revenue jumped 72% from the prior-year quarter to reach $69.9 million. While it did post a loss, submitted applications for Medicare products increased an impressive 66%, addressing any concerns regarding churn.
These results combined with management’s outlook for full year 2019 prompted a wave of bullish calls from the Street’s analysts.
Out of 6 analysts that have published ratings in the last three months, 100% recommended a Buy. Adding to the good news, the $126 average price target suggests that shares could surge 36% in the next twelve months.
The company’s earnings are expected to average 35% growth over the next two years, to $0.49 a share in 2021. In the meantime, management controls a solid balance sheet with $102 million of cash.
Remember, this is just 1 of the 20+ stocks selected for the Smart Investor portfolio. In our Smart Investor newsletter, we share more detailed insights on our new weekly addition.
This Wednesday December 4 at 8:30am we will add two new stocks to the Smart Investor Portfolio as we prepare for the changing investment landscape in 2020. What’s more, if you sign up now, you get up to 48% off! Discover the Smart Investor portfolio here.
Wishing you a world of investment success!