Wall Street is reeling under volatility, which crept up in the second half of last month. However, despite facing severe market fluctuations, all the three major stock indexes — the Dow, the S&P 500, and the Nasdaq Composite — ended in green in February. Moreover, year to date, these indexes are in positive territory after finishing an impressive 2020 defying coronavirus.

Markets may witness fluctuations in the near future. The fear gauge — CBOE VIX — has refused to stay below 20 since Feb 12. Nevertheless, stock markets will remain northbound as the economy will gradually reopen supported by COVID-19 vaccinations. Additionally, the fundamentals of the U.S. economy remain strong as evident by several recently released data.  

Momentum Likely to Continue

Momentum investing calls for a continued appraisal of stocks, ensuring that an investor does not pick a beaten-down name or overlook a thriving one. Momentum investors buy high on the anticipation that a stock will only ascend in the short to intermediate-term.

In December 2020, the U.S. Congress had approved $900 billion of stimulus including one-time cash payments of $600 and a special weekly unemployment benefit of $300. Consequently, personal income climbed 10%, marking the second-highest monthly increase on record. Personal expenditure rose 2.4% — the first gain in three months and the biggest monthly increase since June 2020. Additionally, the savings rate jumped 20.5% in January from 13.4% in the previous month.

Goldman Sachs reported that the total savings of U.S. citizens could climb to $2.4 trillion by mid-2021. On Feb 27, the House of Representatives passed President Joe Biden's proposed $1.9 trillion fresh coronavirus-aid packages. If Senate passes this bill, massive savings along with further stimulus will significantly boost the pent-up demand for U.S. consumers.

A section of economists are skeptical that robust pent-up demand and shortage of inputs due to COIVD-19 related restrictions will result in both demand-pull and cost-push inflation, raising the general price level.

Meanwhile, in January, the core (excluding volatile food and energy items) PCE index — Fed's favorite gauge of inflation — rose 1.5%, year over year, which is well below the central bank's 2% target rate. This supports Fed Chairman Jerome Powell's repeated confirmation of pursuing ultra-dovish monetary policies for a longer period.

In its latest prediction on Mar 1, the Atlanta Fed estimated that the U.S. GDP will jump 10% in the first quarter of 2021. On Feb 11, the Wall Street Journal reported that economists on average expect U.S. GDP to expand nearly 4.9% this year from 4.3% in January.

Notably, in its second estimate, the Department of Commerce has revised fourth-quarter GDP growth to 4.1% from 4% reported earlier. This means that at the end of 2020, total goods and services produced were just about $270 billion less than at the end of 2019. On Feb 1, the Congressional Budget Office projected that the economy is expected to reach the pre-pandemic level of February 2020 by mid-2021.

Our Top Picks

At this stage, it will be fruitful to invest in momentum stocks with a favorable Zacks Rank. We have narrowed down our search to five momentum stocks that have popped more than 20% year to date and have strong upside left for 2021.

These stocks have witnessed robust earnings estimate revisions in the last 7 days highlighting solid business prospects. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Momentum Score of A.  

The chart below shows the price performance of our five picks year to date.

Ovintiv Inc. (OVV Quick Quote OVV - Free Report) is engaged in the exploration, development, production, and marketing of natural gas, oil, and natural gas liquids. It operates through USA Operations, Canadian Operations, and Market Optimization segments.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 27.3% over the last 7 days. The stock price has soared 72.3% year to date.

The Mosaic Co. (MOS Quick Quote MOS - Free Report) produces and markets concentrated phosphate and potash crop nutrients in North America and internationally. It operates through three segments: Phosphates, Potash, and Mosaic Fertilizantes.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 10.2% over the last 7 days. The stock price has jumped 35.7% year to date.

Deere & Co. (DE Quick Quote DE - Free Report) manufactures and distributes farm equipment worldwide. It operates through three segments: Agriculture and Turf, Construction and Forestry, and Financial Services.

The company has an expected earnings growth rate of 80.3% for the current year (ending October 2021). The Zacks Consensus Estimate for current-year earnings has improved 2.2% over the last 7 days. The stock price has climbed 30.1% year to date.

Crocs Inc. (CROX Quick Quote CROX - Free Report) designs, develops, manufactures, markets, and distributes casual lifestyle footwear and accessories for men, women, and children worldwide. It offers various footwear products, including clogs, sandals, flips and slides, shoes, and boots under the Crocs brand name.

The company has an expected earnings growth rate of 20.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.7% over the last 7 days. The stock price has rallied 24.9% year to date.

Select Medical Holdings Corp. (SEM Quick Quote SEM - Free Report) operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States.

The company has an expected earnings growth rate of 9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 31.2% over the last 7 days. The stock price has surged 21.2% year to date.