With the prospect of fresh trade talks between the United States and China, the Wall Street regained momentum after a tumultuous ride at the start of the month. The dual tailwinds of strong corporate earnings and a booming economy have been driving the stock market rally this year and will likely continue to do so (read: Trade-Sensitive Sector ETFs & Stocks to Watch on Talk Hopes).
In particular, Q2 earnings growth has reached its highest level since 2010. Earnings will likely continue to grow in double digits in Q3 as well, per the latest Earnings Trends report.
A slew of upbeat economic data indicates a healthier economy. The U.S. economy is witnessing the fastest pace of growth in nearly four years with a nearly two-decade low unemployment rate of 3.9% and 18-year high consumer confidence. Historic tax cuts, higher government spending and deregulation are fueling growth. Additionally, the Fed is on track for gradual rates hike with the third increase of this year expected as soon as this month. A rising rate scenario also signals a strengthening economy, which is spurring growth in the stock market.
In such a scenario, investors seeking to capitalize on the strong fundamentals, but worried about Trump’s trade policies, should consider mid-cap stocks in the basket form.
