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Global Growth to Hit 7-Year High, Says IMF: 5 Picks

Zacks.com featured highlights include: Lululemon, Sirius, Kohl's and Olympic Steel

The International Monetary Fund (IMF) has maintained its projections for global growth for the years of 2018 and 2019. According to its latest World Economic Outlook report, the upward revisions made in January, primarily to account for the impact of U.S. tax cuts, were kept unchanged. However, the IMF has also warned that extended trade related tensions could harm global growth over time.

Forecasts for several major economies have remained unchanged. At the same time, projections for growth in the United States, Britain and Eurozone have experienced an upward revision. This is why it makes sense to pick up select stocks from these countries likely to benefit from their growth stories. 

IMF Keeps Growth Projections Unchanged

On Tuesday, the IMF confirmed that global growth will hit its fastest pace in seven years during 2018 and 2019. This increase of 0.1% from the pace in 2017 to 3.9% is in keeping with the last estimate released in January. Even as the global economy grows at the fastest pace this year since 2011, almost every major economy is likely to expand for a second successive year.

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Additionally, the IMF projects that the U.S. economy will expand at 2.9% in 2018, up from the previous estimate of 2.7% and 2017’s pace of 2.3%. Growth in the Eurozone is also expected to touch 2.4% while the United Kingdom is expected to expand at 1.6%. Each of these regions is likely to experience a 0.1 percentage point increase in their growth rates, primarily due to higher export demand. 

Trade Tensions Could Derail Growth Story

However, the IMF also believes that the escalation of trade related tensions, particularly between the United States and China, could emerge as a serious risk to continued global growth. The IMF noted that this dispute had led to a spike in volatility for financial markets and even caused an equity market correction.

The IMF believes that a rise in various barriers to trade, both tariff and non-tariff could hurt market sentiment grievously. Further, such actions run the risk of disrupting global supply chains and reducing global investment and productivity. However, the organization’s chief economist Maurice Obstfeld thinks that the two countries could still resolve their disputes through multilateral discussions.

Our Choices

Even though the specter of trade related tensions threatens to disrupt the global growth story, the IMF has decided to maintain its global growth projections for 2018 and 2019. Tax cuts and higher export demand is likely to benefit the growth stories of the United States and the Eurozone, respectively.

Picking stocks from the United States, Eurozone and the United Kingdom which will likely benefit from higher growth looks prudent at this time. However, picking winning stocks may be difficult.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score. 

We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM Score.

Micron Technology, Inc. MU is an Idaho-based company which has established itself as one of the leading worldwide providers of semiconductor memory solutions.

Micron Technology has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 4.3% over the last 30 days.

Macy's, Inc. M is one of the leading department store retailers in the United States. Macy's is based in Cincinnati, Ohio with an additional office in New York.

Macy's has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for the current year has improved by 29.6% over the last 60 days.

Estimate for the current year has improved by 2.4% over the last 30 days.

ArcelorMittal MT is the world’s leading steel and mining company. ArcelorMittal is based in Luxembourg.

ArcelorMittal has a VGM Score of A. The Zacks Consensus Estimate for the current year has improved by 3.7% over the last 30 days. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fresenius Medical Care FMS is one of the largest integrated providers of products and services for individuals undergoing dialysis following chronic kidney failure. Fresenius Medical Care is based in Bad Homburg, Germany.

Fresenius Medical Care has a Zacks Rank #2 (Buy) and a VGM Score of A. The company’s expected earnings growth for the current year is 13.9%.  The Zacks Consensus Estimate for the current year has improved by 7.8% over the last 60 days.

Prudential plc PUK provides retail financial products and services and fund management to many millions of customers worldwide. Prudential is based in London, United Kingdom.

Prudential has a Zacks Rank #2 and a VGM Score of B. The company’s expected earnings growth for the current year is 31.2%.

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Prudential Public Limited Company (PUK) : Free Stock Analysis Report
 
Fresenius Medical Care (FMS) : Free Stock Analysis Report
 
Macy's, Inc. (M) : Free Stock Analysis Report
 
ArcelorMittal (MT) : Free Stock Analysis Report
 
Micron Technology, Inc. (MU) : Free Stock Analysis Report
 
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