By: Tom Gentile
on March 1st, 2021
The U.S. government’s 2nd stimulus package pumped $1.9 trillion into the economy, and two more packages are on the horizon. The first stimulus check was paid in April 2020, in the heat of the pandemic, kicking off an impressive bull run in the S&P 500 to the tune of 40%+.
At the time, Americans were under lock-down and travel was restricted. So, online businesses boomed! Companies like Amazon (NASD: AMZN) and Zoom Video Communications (NYSE: ZM) blasted off like a SpaceX Falcon Heavy rocket.
Now Americans are chomping at the bit to shake off the dust, get out, play and generally treat themselves. These stimulus packages represent rare opportunities for traders to cash in. What we need to determine is which companies will experience the biggest upside.
The easy, most diversified answer is to trade the overall market. The April 2020 stimulus package kicked off a 40% bull run, that’s still running. This massive influx of cash will likely keep the bull stamped running.
Exchange Traded Funds
Consider trading one of the market exchange traded funds (EFTs).
The iShares Russell 2000 EFT (NYSE: IWM) has been on a tear from January 2021 to April 2021, as has Select SPDR S&P 500 ETF (NYSE: SPY). Both are poised to ride the stimulus wave.
Digging a little deeper, some sectors are uniquely positioned to attract Americans who may now have extra cash in their pockets.
By far, the sector best poised to benefit is consumer discretionary. You know, stuff that you don’t really need… a Starbucks coffee, a trip to Cozumel or the latest smart watch. With extra cash to burn, you better believe that many Americans will treat themselves.
The Select SPDR Consumer Discretionary ETF (NYSE: XLY) includes the likes of Amazon (NASD: AMZN), Home Depot (NYSE: HD), Expedia (NASD: EXPE), Marriot (NYSE: MAR), Royal Caribbean (NYSE: RCL), Starbucks (NASD: SBUX) and McDonalds (NYSE: MCD).
The companies in the XLY are likely beneficiaries of stimulus-inspired spending, but trading the overall sector is a great way to spread the risk.
Another sector already skyrocketing (containing airlines) is the Select SPDR Industrials ETF (NYSE: XLI). The XLI includes American Airlines (NYSE: AAL), United Airlines (NYSE: UAL) and Delta Air Lines (NYSE: DAL) among others. Trade the sector or the airlines themselves.
Promising Individual Stocks
Some individual stocks are particularly well-positioned to benefit from stimulus-inspired spending.
Amazon (NYSE: AMZN)
While Americans valued the convenience of online shopping pre-pandemic, that value has now reach an epic level; and no one capitalizes on online shopping better than Amazon. With a few clicks of the mouse, virtually any product is at your doorstep. Amazon rose an astounding 64% after the April 2020 stimulus check and is likely to break to new highs over the coming months.
Walmart (NYSE: WMT)
In April of 2020, 84% of people spent some of their check on food. Of course, WMT sells food as well as basic necessities. The advent of Walmart+ online shopping is rivaling Amazon. Walmart’s one-two punch of online and instore revenue streams makes it well-positioned to profit big as Americans fill their cupboards and closets.
Expedia (NASD: EXPE)
Expedia is a leader of the online travel booking pack. Americans are ready to go somewhere… ANYWHERE. Flights, hotels and rental cars are vacation necessities. XPE is in a meteoric bull run that began with the 2020 stimulus package and is destined for further upside.