February Ends In Green Amid Extreme Volatility: 5 Top Picks

After a gap of three months, Wall Street faced severe volatility in February. Soaring yields on long-term U.S. Treasury Notes as investors reallocated funds from safe-haven government bonds to risky equities and market participants' expectation of an inflationary situation much faster than the Fed projected, triggered the panic button in stock markets in the second half of last month.

However, Wall Street maintained its northbound journey in February. The three major stock indexes — the Dow, the S&P 500, and the Nasdaq Composite — gained 3.2%, 2.6%, and 0.9%, respectively. Moreover, the small-cap specific Russell 2000 Index surged 6.2%. Year to date, the Dow, the S&P 500, the Nasdaq Composite, and the Russell 2000 are up 1.1%, 1.5%, 2.4%, and 11.5%, respectively.

Meanwhile, the fundamentals of the U.S. economy remain stable. Despite the weaknesses in the labor market, personal income and expenditure have improved and savings are still sky-high. Nationwide deployment of COVID-19 vaccines and the reduction of new coronavirus cases to a great extent should enable the U.S. economy to systematically operate at the pre-pandemic level. Let's consider some near-term positives.

Catalysts to Drive Wall Street

First, in December 2020, the U.S. Congress has approved $900 billion of the second round of fiscal stimulus that included one-time cash payments of $600 and a special weekly unemployment benefit of $300. The immediate effect of this relief package was felt in January.

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.

Second, on Feb 27, the House of Representatives passed President Joe Biden's proposed $1.9 trillion fresh coronavirus-aid package. Per the bill, eligible U.S. citizens will receive a $1,400 check payment plus $1,400 for any dependent. Moreover, the extra amount in unemployment benefits would be increased to $400 a week and the period will be extended up to Aug 29. If Senate passes this bill, it is likely to significantly boost the pent-up demand for U.S. consumers.

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