The Top Growth Stocks on a Firmer US Economy Ahead of FED Interest Rate Cuts

The Top Growth Stocks on a Firmer US Economy Ahead of FED Interest Rate Cuts

The US economy remains on a firmer footing as it continues to defy dire warnings of recession amid the high-interest rate environment. Initially, there were concerns that the economy would plunge into recession as the US Federal Reserve hiked interest rates to 22-year highs of 5.25% and 5.50%. While the hikes were a way for the Fed to try to tame runaway inflation, there were concerns that they would take a toll on the economy.

Nevertheless, economic activity has remained strong, supported by a tight labor market with rising wages. In return, consumer spending has remained strong, offering much-needed support to a fragile economy susceptible to high-interest rates.

In the last quarter of 2023, the US gross domestic product increased at a 3.2% annualized rate, affirming the resilience of the US economy amid the tight monetary policy environment. Consumer spending, which accounts for more than two-thirds of the US economic activity, increased 3.0% in the last quarter.

Economists are overly optimistic about the economy even as the Fed continues to push back on the need to cut interest rates. GDP is expected to rise by 3.2% in the first quarter, which is one of the reasons the Fed is likely to remain tight-lipped in cutting interest rates. The International Monetary Fund expects the US economy to expand by 2.1% in 2024, nearly double the anticipated growth in other advanced economies, including Japan, Germany, and the UK.

The US economy has continued outperforming other advanced economies partly because Congress passed the $2.2 trillion economic stimulus package at the height of the COVID-19 pandemic. The stimulus package led to the most significant influx of federal money into the US economy, which is credited with helping fuel strong consumer spending. Consequently, the ability and capacity to spend amid runaway inflation have been a boon for the economy.

The Reel Shares Growth Equity Fund RELPV is an investment vehicle for investors looking to diversify their portfolios to high-growth investment instruments. The fund gives investors exposure to a diverse range of investment products domestically and overseas, and its investment approach is to deliver long-term capital growth.

While inflation has been painful, a strong jobs market has also helped disposable income, fuelling consumer spending. The unemployment rate in the US is below 4%, the lowest in history. Amid the low unemployment rates, real wages have also raised significantly, supporting consumer spending.

Energy independence is another factor supporting the US economy’s continued growth. In the aftermath of the Russian invasion of Ukraine, most European nations struggled as the energy crisis rocked the economy. Higher energy prices pushed inflation higher. While most European nations experienced a 20% surge in energy prices, the US only experienced a 3% to 4% rise.

A resilient economy has been one of the catalysts behind the impressive run in the US equity markets. The S&P 500 rallied by more than 24% in 2023 as the Nasdaq 100 gained 48%. The gains in the equity markets came as investors remained confident that the economy would stay clear of recession even as the Fed continued to hike interest rates.

Nevertheless, the Fed coming through on interest rate cuts would be a significant development likely to offer much-needed support to the equity markets. While stock continues to rise even as the Fed hiked last year, the positive impact of interest rate cuts on companies and economic activities is expected to strengthen investor sentiments on equities.

With the Fed insisting it has made good progress in taming inflation, the US equity outlook has improved significantly owing to the prospect of potential cuts. Stocks in the cloud, semiconductor, and biotechnology sectors have been making big moves in the markets as they remain well-positioned to profit from a loose monetary policy.

The best growth stocks command a high price-to-earnings multiple backed by robust earnings growth and quarterly solid guidance. Additionally, they are companies well-positioned to benefit from a low-interest rate environment.

Some of the top growth stocks worth paying attention amid a booming economy include:

JPMorgan

While financial services companies do well in times of high-interest rates, they also outperform in times of economic boom amid low-interest rates. JPMorgan is one of the top growth stocks as the world’s largest bank and financial services provider.

The bank has navigated and emerged from various crises, affirming its ability to generate long-term value. During the 2023 banking crisis, it acquired First Republic Bank, further strengthening its edge in the sector. The fact that it generated 17% in return in 2023 amid the high-interest rate environment means it could do even better on the economy staying clear of recession.

Pinterest

Pinterest is one of the companies well-positioned to do well during an economic boom. Operating as a social media company, it generates most of its revenues from advertising. Likewise, with the company experiencing a significant uptick in monthly active users, up by 11% in the December quarter, things are looking good.

With over half a billion monthly active users, Pinterest remains well-positioned to attract a good chunk of the advertising spending, which should support its revenue base. The fact that the company does not use data tracking tools but relies on users to freely and willingly share content on its platform strengthens its prospects as a growth company and stock.

Tesla

The auto industry is experiencing one of the biggest revolutions in recent history. Tesla is one of the companies spearheading the evolution as the pioneered electric and self-driving car maker. Tesla has grown in strength by unleashing influential and in-demand electric and self-driving cars.

While the company faces stiff competition from other automakers, it has already carved a niche in the high-end segment with the rollout of some of the most sought-after electric vehicles. The fact that the company has more than 2 million Cybertruck reservations underscores the brand’s resilience, affirming its long-term prospects.

SentinelOne

In a world where the Internet of Things is increasingly taking over amid the artificial intelligence revolution, demand for cybersecurity solutions should continue to rise. Likewise, SentinelOne is one company well positioned to benefit as more businesses shift their data online and into the cloud, fueling demand for cybersecurity solutions.

Demand for cybersecurity solutions will always be strong in a steady economic environment, which favors SentinelOne’s core business. The company has already started leveraging artificial intelligence to strengthen its cybersecurity solutions, which should improve its edge in the industry.

The company is increasingly winning over larger customers, ending 2024 with more than 1,000 customers generating at least $100,000. Consequently, the company’s revenue will triple over the next four years, affirming its status as a must-watch growth stock.

Advanced Micro Devices

While artificial intelligence is in the early stages of development and adoption, chipmakers remain the center of attention. Advanced Micro Devices is one of the companies well positioned to benefit as demand for chips to power the AI revolution heats up. The company’s edge stems from producing some of the most powerful microprocessors and graphics semiconductors used in various devices and servers.

Advanced Micro Devices is a top growth stock in the semiconductor space as demand for its central processing unit data center server remains strong. Its revenue is projected to grow by 16% in 2024, which should help bolster the stock’s sentiments in the market.

Exelixis

Healthcare stocks are some of the best defensive plays because people cannot control when they get sick. Exelixis is one company that comes out on top because it boasts a robust pipeline of drugs that will always be in demand regardless of the economic situation.

The company’s lead drug is Cabometyx, which is approved for treating cell carcinoma and hepatocellular carcinoma. The drug generates over $1 billion in sales for the company, and the company has already begun examining it to enhance its usage.

As demand for cancer drugs rises, Exelixis should remain a top growth stock for investors seeking exposure to the healthcare sector.

Meta Platforms

Arguably one of the most prominent players in the lucrative social networking space. It does not get any better than Meta Platforms, which boasts of an array of apps led by Facebook, Instagram, WhatsApp, and Messenger. As companies and brands increase their spending on advertising to reach the mass market, most of it ends up on Meta Platforms.

With over 4 billion active users on its various apps, Meta Platforms should continue to see significant revenue growth amid a booming economic environment. The company’s edge stems from its strong ad pricing power, which allows it to rake in considerable cash from the lucrative advertising business.

Caterpillar

Caterpillar is a top-growth stock worth watching. It produces some of the largest and most powerful construction and mining equipment. The company experiences booming business and strong demand for equipment tools whenever the global economy is doing well.

When the global economy is doing well, heightened construction and mining activities always translate to strong demand for Caterpillar equipment. As central banks cut interest rates, making it easier to access cheap capital to finance massive projects, caterpillar should reap big.

Booking Holdings

As central banks around the globe resort to cutting interest rates to fuel economic activity, the travel industry should be one of the biggest beneficiaries. Booking Holdings is one company well positioned to benefit as more people hit the roads, sea, and air, traveling from one destination to another.

Given that the company operates hotels, resorts, and cruise lines, it continues to earn big money as the travel industry bounces back from the COVID-19 slowdown. The company continues to generate significant fees from online, traditional travel, restaurant reservations, and related services.

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