Goldman’s consumer stocks picks in face of rising interest rates
July 2, 2013, 2:29 PM
By Andria Cheng
Investors understandably are getting antsy about rising interest rates’ impact on consumer spending and the housing market. Goldman Sachs has some thoughts on the subject that might calm them down a bit.
Goldman, in a report released on Tuesday based in part on historical share price performance, said it favors discretionary stocks over so-called staples stocks when rates are on the rise.
For instance, its study of the retail index’s typical median six-month relative performance when rates are rising found the sector tends to outperform such segments as packaged foods and beverages. Since rates started to rise on May 3, the retail index has risen 4.9% and the auto sector is up 9.6% compared with declines for tobacco, packaged food and staples segments.
“Discretionary names tend to perform better in the initial phases of interest rate increases,” Goldman Sachs said. “U.S. discretionary stocks are more levered to the U.S. economy, the highest visibility region in the globe, whereas staples names are more tethered to lower-visibility regions, most notably emerging markets.”
The firm also said it sees “ongoing appeal” for companies that cater to high-end consumers. For instance, luxury auto sales are outpacing overall auto sales growth. Meanwhile, with rising real estate values and financial assets boosting their net worth, high-end shoppers are faring better than most others who are under less pressure from the recent payroll tax hike, it said.
Its list of favorites includes Estee Lauder EL , Michael Kors KORS , Tumi TUMI , Starbucks SBUX and Whole Foods WFM as a result.