The broader market averages fell fractionally this week, as investors were focused on news coming out of the nation’s capital. Energy names rallied, while Communication Services stocks lagged.
President-elect Joe Biden provided more details of his first 100 days of office plans. On Wednesday, the House of Representatives voted to impeach President Trump for a second time.
On Thursday, Biden proposed a $1.9 trillion stimulus program that checked most of the expected boxes. $350 billion of funds for State and Local governments are present this time. Qualified individuals would be in line to receive a direct payment of $1,400.
It remains to be seen how much of this Biden can get through Congress, with slim margins for the Democratic party in both chambers. There’s also a question of who may face higher taxes to help fund these programs.
Based on the economic news this week, the U.S. consumers could use the new stimulus program. On Friday, it was reported that retail sales fell 0.7% in December (down 1.4% excluding autos).
The preliminary January reading on the U. of Michigan Consumer Confidence index also showed a sequential decline. The previous day, a print of 965,000 initial jobless claims marked the highest reading since last August.
It may no longer be the top news story in the financial press, but the coronavirus pandemic is still with us.
This week, we crossed the somber milestones of 2 million reported deaths globally from the COVID-19 pandemic. This includes 400,000 deaths in the U.S. This near-term reality is paired up against the hopeful outlook that the Biden administration has set a goal to distribute 100 million vaccines during his first 100 days of office.
If the pandemic continues to persist, it could hamper the positive trajectory of the economic recovery in 2021.
What to Expect Next Week
Financial markets are closed on Monday for a holiday. All eyes will be on Washington D.C. for the Presidential inauguration on Wednesday, where security is noticeably tighter, following the violent events of Jan. 6.
43 companies in the S&P 500 will post results next week, including these notable names:
Jan. 19: Bank of America (BAC), Goldman Sachs (GS) and Netflix (NFLX)
Jan. 20: Morgan Stanley (MS)
Jan. 21: IBM (IBM) and Intel (INTC)
Refinitiv estimates that aggregate profit from S&P 500 companies declined 8% in the final quarter of 2020, from a year ago. This could prove to be the low-water mark for corporate earnings however, as the firm also predicts that figure to rebound 23.9% in 2021.
Following the snap-back recovery in stocks last year from Pandemic lows, we believe that investment gains will be harder to come by in 2021.
As a result, deciding what and when to buy can be challenging for any investor.
However, the fact remains that attractive investments are out there, if you’re willing to dig a little deeper.
One such Energy name is worth a closer look and is our Stock of the Week.
Stock of the Week: Enterprise Products (EPD)
The company operates midstream energy assets across the U.S., including approximately 50,000 miles of pipelines.
The stock gained more than 7% this week. We believe this momentum can continue in the early months of 2021. Here’s why:
Enterprise acts like a toll collector in the energy business, which helps insulate the business from volatility in underlying commodity prices. 85% of the company’s operations are fee-based and management says that it can be paid up to seven different times, as oil and natural gas moves throughout the production cycle.
One sign that business is good is that management boosted its quarterly dividend on Jan. 7, to $0.45 a share (7.9% yield). Investors at the close of trading on Jan. 27 will qualify for the payment on Feb. 11.
In addition to offering steady income, Wall Street also sees upside potential for Enterprise. All nine analysts tracked by TipRanks rate the stock a Buy. The average price target of $24.63 represents 7.4% upside potential.
Finally, the company carries a Smart Score of 10/10 on TipRanks. This proprietary score utilizes Big Data to rank stocks based on 8 key factors that have historically been a precursor of future outperformance.
On top of the positive aspects mentioned already, the Smart Score indicates that shares have seen insider buying, in addition to improving sentiment from hedge funds and financial bloggers.
FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks.