Today’s episode of Full Court Finance at Zacks dives into the stock market's fall after Jay Powell’s Jackson Hole speech where he reaffirmed the Fed’s resolve to fight 40-year high inflation. With surging prices still a major issue and the Fed determined to keep up its fight, investors might want to buy stocks poised to outpace inflation heading into September and beyond.
Stocks tumbled through early afternoon trading Friday after Powell gave his highly anticipated speech from Jackson Hole. The Fed Chair’s comments shouldn’t have come as too much of a surprise to the market, since Powell and many of his peers had remained steadfast in their commitment to raising rates to combat soaring prices.
Yet, the market appeared to be hoping for something far more dovish. Much of the stock market’s run off its mid-June lows came on the back of growing sentiment that inflation had finally peaked and the Fed could take a step back.
Unfortunately, bets on peak inflation always seemed a bit premature and far too optimistic since inflation remained at 40-year highs in July, and gas prices, although down from their peaks, were still up 40% YoY. Plus, unemployment hit 50-year lows and a tight labor market pushed up wages.
Powell acknowledged once again Friday that the Fed understands it might have to cause some harm on the jobs and growth fronts if it hopes to tame inflation. “Those are the unfortunate costs of reducing inflation,” Powell said during his Jackson Hole remarks. “But a failure to restore price stability would mean far greater pain.”
Growth stocks that rallied off their mid-June lows could come under pressure. And changing consumer habits are quickly making their way through the economy.
Thankfully, there are still stocks poised to outperform the market during the ongoing bout of inflation.
The first stock that we dive into today is Exxon Mobil Corporation XOM. Exxon is coming off another blockbuster quarter where it generated roughly $17 billion in free cash flow. The U.S. oil titan’s earnings estimates continue to soar, driven by strong oil prices, streamlined business operations, and beyond. Plus, XOM’s valuation and dividend payout help make Exxon worth considering at the moment.
The next stock up is big box retail titan Costco Wholesale COST. Costco is a one-stop shop and it’s able to keep its prices low because of its membership fees. Costco’s memberships also help foster very loyal customers. COST is set to post another year of double-digit earnings and revenue growth. Plus, Costco shares have held up well in 2022 and have crushed Target, its industry, and the market over the past decade.
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