The market has been rather volatile and unpredictable lately. The earnings season has started off pretty strongly, but the rising yield on 10-year Treasuries is weighing on the overall market, and overshadowing the positive earnings reports we have been seeing.
Rising rates are definitely a reason for concern. The yield on 10-year Treasuries has hit 3.0%, a level we haven’t seen since 2014. The current yield is still pretty low and should not result in a huge money transfer out of the market, but the fear is that if it continues to rise we will see the market correct even further as investors pull money out of equities and put that money to work in more traditional fixed income assets. That is a concern, but most analysts seem to agree at this point that the benchmark 10-year rate will not rise too much from its current level.
After years of a very bullish market, investors are not used to seeing the type of action we have seen over the last couple of months, and are unsure whether to stay in the market, or sit on the sidelines until things calm down.
For long-term investors, there is no reason to panic. The market probably needed a little correction, and the underlying fundamentals of the overall economy remain strong. Unemployment is low, wages are starting to rise (albeit slowly), and the housing market remains on solid ground.
Rising rates may not be the best short-term thing for the market, but they do suggest strength in the underlying economy, which is bullish, and should convince you to keep your money working in the market.
However, you do need to be careful where you invest. You should look for companies that have both shown recent strength, as well as show solid fundamentals that support additional growth and upside.
InvestorsObserver has a screening tool called the Stock Score Report which takes into account both technical and fundamental data when ranking stocks when ranking the overall stock universe. Combining both approaches is a great way to screen for stocks that have not only shown recent strength, but also have the best potential to build on their recent gains.
The following five stocks are among the top ranked stocks in the screener at this time.