The stock market is the best tool ordinary people have for monitoring the market and economic conditions.
Thus one of the best ways to monitor economic conditions in 2020 is to watch a few stocks. You do not have to buy the stocks just watch their performance to see how where the economy is going.
Fortunately, it has never been easier to monitor stocks’ performance. Tools such as Stockrow and Ycharts give you access to large amounts of data about individual equities. Meanwhile, Google can show you the price of almost any stock anytime.
Hence, anybody can assemble a list of stocks and monitor it. In fact, you can probably monitor any stock on any exchange in the world with a search engine’s help.
Stocks to Watch in 2020 include:
1. Saudi Arabian Oil Co (TADAWUL: 2222) or Saudi Aramco.
The company NPR labels “the World’s Most Profitable Company” went public in December 2019. Saudi Aramco is an interesting company because it represents a nation Saudi Arabia.
Saudi Aramco reportedly generated revenues of $354.9 billion and a net income of $111.10 billion in 2018. Yet, Mr. Market was paying $35.10 for Aramco shares on 31 December. Thus, Saudi Aramco could be the greatest value investment of all time.
I advise against investing in Aramco because of Saudi Arabia’s horrendous human rights record. The country’s secret police has a habit of murdering innocent journalists, for example.
Aramco is a risky investment because of Saudi Arabia’s proximity to the warzones in Yemen, Iraq, and Syria. In fact, Yemen’s Houthi rebels reportedly knocked out half of Saudi Arabia’s oil production capacity with a 14 September drone attack.
Consequently, most of Aramco’s assets could go up in flames. In addition, they could overthrow Saudi Arabia’s current ruler Prince Mohammed bin Salman (MBS). MBS reminds me of another Middle Eastern monarch, Shah Mohammad Reza Pahlavi of Iran. The Shah was a close American ally in the 1970s, much as MBS is a close US ally today.
In 1979, a revolution drove the Shah into exile and destroyed his regime. I suspect MBS will follow in the footsteps of the Shah, or King Charles I of England. Oliver Cromwell’s Roundhead rebels executed the authoritarian Charles I after the English Civil War in 1649. I think large sell offs of Aramco stock by Saudis could be a sign revolution is imminent in the Kingdom.
However, monitoring Saudi Aramco is a great way of determining where the world’s oil business is heading. Aramco is a great barometer for oil, energy, and the global economy because it supposedly supplies 10% of the world’s oil, Reuters claims.
2. Berkshire Hathaway (NYSE: BRK.B)
You need to monitor Warren Buffett’s company, because Uncle Warren is one of the best judges of economic conditions out there. Historically, Buffett anticipated both the Tech Bubble of 2000 and the Great Meltdown of 2007-2008.
Currently, Berkshire Hathaway (NYSE: BRK.A) had $128.2 billion in cash on hand on 30 September 2019, Markets Insider claims. I think Buffett is accumulating cash because thinks a major economic crisis is imminent. Uncle Warren does not know exactly what is coming, but he suspects something bad will occur.
Buffett wants all that cash for two reasons. First, the cash will enable Berkshire Hathaway to survive economic turbulence without borrowing money. Second, the cash gives Berkshire the ability to take advantage of opportunities the next crash will offer.
For example, Buffett can buy companies that go bankrupt or run out of money at a low price. Notably, Berkshire Hathaway bought Fruit of the Loom out of bankruptcy for $835 million in cash in 2002. Plus Berkshire bought the Burlington Northern Santa Fe (BNSF) railway for $26.4 billion in 2010.
Watching Berkshire Hathaway’s cash and short-term investments is a good way to determine what Buffett thinks of the economy. Buffett has correctly anticipated economic crises before.
Finally, Berkshire Hathaway is one company that could retain its value or grow during an economic crisis. Thus, watching Berkshire Hathaway, is one of the best ways to monitor economic conditions.
3. NVIDIA (NASDAQ: NVDA)
Tracking NVIDIA (NASDAQ: NVDA) is a great way to check the health of the technology and entertainment sectors. To explain, NVIDIA makes the chips and graphics processor units (GPUs); video games, supercomputers, cryptocurrencies, and artificial intelligence run on.
High sales and revenues at NVIDIA is an indicator of high demand for tech infrastructure. However, falling revenues at NVIDIA could show people are buying fewer video games and computers.
Notably, NVIDIA experienced four quarters of falling revenue growth in 2019. In detail, NVIDIA’s reported negative revenue growth rates of -24.25%, -30.78%, -17.42%, and -5.25% in 2019. However, NVIDIA’s revenues grew from $2.205 billion on 31 January 2019 to $3.014 billion on 31 October 2019.
Hence, NVIDIA’s revenues show falling demand for video gaming technologies. That could be a sign consumers have less disposable income to spend on video games.
Likewise, falling sales at NVIDIA could indicate there is a lower demand for artificial intelligence (AI) and similar technologies. In addition, falling revenues at NVIDIA could be a sign of lower corporate investment in information technology. Finally, falling revenues at NVIDIA could show there is no demand for new technologies.
4. Amazon (NASDAQ: AMZN)
If you want to gauge the health of the American economy, Amazon (NASDAQ: AMZN) is a good company to examine.
Amazon can tell you if American consumer spending because Amazon is now America’s department store. Tens of millions of Americans conduct most of their shopping on Amazon. Thus, rising at revenues at Amazon could indicate rising consumer spending in America and beyond.
If Amazon is growing the economy is growing. However, the reverse could be true. If a recession starts, Amazon could be one of the first companies affected.
Amazon is also a good company to examine for tech backlash. To explain, declining Amazon share prices, could demonstrate popular anger at Big Tech. However, the growing anger at Big Tech in America is not being reflected in tech companies’ revenues.
Finally, Amazon’s stock price and market capitalization could indicate how average investors view the American economy. To explain, if Amazon’s stock price is high investors have confidence in the American consumer and her willingness to spend. If Amazon’s share price falls, Mr. Market; and ordinary investors, could lose faith in the economy and consumer spending.
Thus Amazon’s $1,847.84 share price on 31 December 2019 is evidence of a good holiday shopping season. Investors see consumers spending so they buy Amazon.
5. Apple Inc. (NASDAQ: AAPL)
Apple (NASDAQ: AAPL) is the world’s most popular stock with a market cap of $1.3 trillion on 31 December 2019.
Thus tracking Apple’s market cap is a great way to ascertain investor sentiment. If Apple’s market cap is high money is flowing into stocks. Conversely, if Apple’s market cap falls investors are losing faith and selling.
High market caps for widows and orphans stocks such as Apple is a sign of low returns on savings accounts and instruments, such as CDs. To explain, people are trying to make up for lost interest income by buying dividend and income stocks such as Apple.
Thus, a falling market cap at Apple could show rising interest rates. Additionally, Apple is a popular stock with foreign investors.
Apple is also a good barometer of consumer sentiment because it sells luxury products such as iPhones, iTunes, iMacs, Apple TV etc., apps etc. Growing revenues at Apple show consumers have income and are spending more. Falling revenues at Apple can be a sign that consumers are afraid to spend.
I think the five stocks above, are good indicators of market sentiment. Monitoring these companies and their financial performance can show you where the economy could go.