The broad stock market is sizzling this holiday season thanks to solid corporate earnings and improving economic fundamentals. Total earnings for the S&P 500 index are expected to be up from 0.7% growth seen in 2016 to 7.6% for 2017 and 11.6% for 2018.
Meanwhile, the economy expanded at the fastest clip in three years in best back-to-back quarters with at least 3% GDP growth and unemployment at the lowest level of 4.1% since December 2000. Americans are highly optimistic about the economy with consumer confidence climbing to the highest level in 17 years. Additionally, the combination of other factors like a jump in oil price and higher interest rates are fueling growth.
The Trump effect is adding to the holiday spirit with a tax cut on its way to Congress and the final signature of the bill highly anticipated. This is especially true, as a massive $1.4-trillion tax cut will create an economic surge, boosting job growth and reflation trade. It will further accelerate earnings, leading to increased dividend and buyback activities. Notably, the tax legislation could double the growth pace of earnings in 2018.
Moreover, Santa rally is coming up and would provide further boost to stocks. A Santa rally refers to the increase in stock prices in the final week of the calendar year (i.e. between Christmas and New Year’s Day) that extends into the first two days of the New Year.
Against such a backdrop, while most of the stocks and ETFs have been surging over the past one month, there are some hidden gems or Secret Santa as we call them that could surprise investors with big returns this Christmas based on the current trends. We have highlighted some of these in detail below:
ETFs
Here, we have chosen five ETFs that have AUM of less than $200 million, average daily volume of under 50,000 shares and are lagging the gain of 3.2% for the broad market fund (SPY) over the past month. However, these have a Zacks ETF Rank # 1 (Strong Buy) or 2 (Buy), suggesting their outperformance in the final weeks of 2017.
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