Even though escalating trade fears unnerved investors in recent months, the U.S. stock market is still hovering near record highs. This is especially true as the latest round of levies from both the United States and China have come in lower than expected and resulted in a market rally.
Trump has imposed tariffs of 10% on $200 billion worth of Chinese goods starting Sep 24, much lower than 25% as expected. However, the taxes will be increased to 25% effective Jan 1. In retaliation, China slapped tariff of 10% (much lower than 20% touted) on more than 5,000 American products worth $60 billion.
Additionally, the market is showing strong complacency backed by a booming economy and strong corporate earnings. 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. Meanwhile, earnings growth in the second quarter reached its highest level since 2010. The trend of double-digit growth is expected to continue in Q3 as well, per the latest Earnings Trends report.
Aside from trade war fears, inflationary pressures are building up and rising rates will lead to a rise in borrowing costs, thereby hurting consumer spending and economic growth. This will result in continued volatility. As a result, investors could be well served by looking at the ETFs and stocks of the top-ranked sectors.
How to Find the Top-Performing Sectors
While identifying the top-performing sector is a daunting task, the Zacks Industry Rank makes this process simpler. The Zacks Industry Rank is determined by calculating the average Zacks Rank for each stock in the industry and then assigning a rank to it. First, we selected the best industries that have a top Zacks Rank.
A top Zacks Industry Rank means that more stocks within that group are seeing upward earnings estimate revisions. Since an industry is a group of stocks in a similar business, this is the perfect way to size it up.
