4 Consumer Discretionary Stocks to Buy on Cooling Inflation
Inflation has started slowing and the Fed’s aggressive interest rate hike policy appears to be finally bearing fruit. Fresh data shows that inflation slowed further in June to its smallest annual increase since early 2021.
The Labor Department said on Jul 12 that the consumer price index (CPI) rose 3% year over year in June from 4% in May. This is the lowest level since March 2021. Economists had predicted a rise of 3.1%.
Month over month, CPI increased a modest 0.2% in June, beating analysts’ expectations of a rise of 0.3%. More importantly, core CPI, which excludes the volatile food and energy prices, rose just 0.2% month over month in June. On a year-over-year basis, core CPI rose 4.8%, its smallest increase in almost two years.
Although food prices rose in June, the situation is far better than a year ago. Inflation had hit a 40-year high of 9.1% in 2022 but has since cooled to 4.8%, implying that the Fed’s decision to hike interest rates has helped in taming inflation.
A day later, the Bureau of Labor Statistics reported that the producer prices also eased in June. The producer price index (PPI) rose a modest 0.1% month over month in June, beating expectations of a rise of 0.2%. Core PPI, which strips out the volatile food and energy costs, also rose 0.1% in June.
Although inflation is showing signs of cooling, market participants believe that Fed will still go for an interest rate hike in July. This is because the Fed had earlier said that two more rate hikes of 25 basis points each would be required this year.
However, they also believe that the Fed might finally go for only one interest rate hike instead of two and could pause its tightening policy after July. A pause in interest rates bodes well for the broader market.
Increasing interest rates can have multiple effects, including impacting consumer spending patterns, raising borrowing costs, influencing economic growth, and affecting stock market performance.
Additionally, companies in the consumer discretionary sector are anticipated to gain from easing inflation rates and a pause in interest rate hikes. This is because consumers are likely to have more discretionary income, which can be allocated toward non-essential purchases.
Our Choices
Therefore, from an investment perspective, we have identified four stocks from the consumer discretionary sector that are likely to capitalize on reduced inflationary pressure. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Bluegreen Vacations Holding Corporation BVH operates as a vacation ownership company. BVH markets and sells vacation ownership interests and manages resorts in leisure and urban destinations.
Bluegreen Vacations’ expected earnings growth rate for the current year is 17.6%. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the past 60 days. BVH presently sports a Zacks Rank #1.
Wynn Resorts, Limited WYNN is a leading developer, owner and operator of casino resorts. WYNN currently owns and operates casino hotel resort properties in Las Vegas, and in Macau Special Administrative Region of the People's Republic of China.
Wynn Resorts’ expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 30.1% over the past 60 days. WYNN currently carries a Zacks Rank #2.
OneSpaWorld Holdings Limited OSW is a provider and innovator in the fields of wellness, beauty, rejuvenation and transformation on cruise ships and on land. OSW’s service includes traditional and alternative massage, body and skincare treatment options, ayurvedic treatments, comprehensive hair and nail services, fitness, acupuncture, herbal medicine, pain management, and medi-spa.
OneSpaWorld Holdings’ expected earnings growth rate for the current year is 89.3%. The Zacks Consensus Estimate for current-year earnings has improved 10.4% over the past 60 days. OSW presently carries a Zacks Rank #2.
Acushnet Holdings Corp. GOLF designs, develops, manufactures and distributes golf products. GOLF’s operating segment consists of Titleist Golf Balls, Titleist Golf Clubs, Titleist Golf Gear and FootJoy Golf Wear.
Acushnet Holdings’ expected earnings growth rate for the current year is 6.9%. The Zacks Consensus Estimate for current-year earnings has improved 1% over the past 60 days. GOLF presently carries a Zacks Rank #2.
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Wynn Resorts, Limited (WYNN) : Free Stock Analysis Report
Acushnet (GOLF) : Free Stock Analysis Report
OneSpaWorld Holdings Limited (OSW) : Free Stock Analysis Report
Bluegreen Vacations Holding Corporation (BVH) : Free Stock Analysis Report
