The much-awaited Federal Reserve’s September policy meeting begins today, with expectations high among market participants that the central bank will finally start its rate-cut cycle. This will be the first time that the Fed will cut interest rates since March 2020. Investors are expecting at least a 25-basis point rate cut this month.
Given this situation, investing in consumer discretionary stocks such as Crocs, Inc. CROX, Traeger, Inc. COOK, DoubleDown Interactive Co., Ltd. DDI, Royal Caribbean Cruises Ltd. RCL and Mohawk Industries, Inc. MHK would be ideal.
Each of these stocks has a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Rate Cut Almost Assured
A softer-than-expected jobs data and a marginal rise in monthly inflation in August crashed hopes of a 50-basis point rate cut by the Federal Reserve in its Sept. 17-18 policy meeting. However, even a small rate cut will be cheered by investors.
The Federal Reserve raised interest rates by 525 basis points since March 2022 in its fight to bring down 40-year-high inflation. Hopes of a rate cut earlier this year were dampened after inflation unexpectedly rose in the first quarter.
The Fed is finally convinced that inflation has started cooling and is on track to reach its 2% target. This has raised hopes of the first rate cut in more than four years. The CME FedWatch tool shows a 100% probability of a 25-basis point cut this week, while a 50% chance of a 50-basis point cut.
Consumer Discretionary Stocks to Get a Boost
Consumer discretionary stocks are considered growth stocks, inversely related to the market interest rate. Lower interest rates tend to boost such stocks by reducing the opportunity cost of holding non-yielding assets like consumer discretionary stocks.
Also, the U.S. economy continues to remain on solid ground. The U.S. economy rebounded in the second quarter, with the GDP growing at an annualized rate of 3% after increasing just 1.4% in the first quarter.
Also, consumer sentiment is high. The Michigan Consumer Sentiment Index’s preliminary reading for September rose to 69 from 67.9 in August, its highest level since May 2024.
4 Consumer Discretionary Stocks to Gain
Crocs, Inc.
Crocs, Inc. is one of the leading footwear brands with a focus on comfort and style. CROX offers a wide variety of footwear products, including sandals, wedges, flips and slides, that cater to people of all ages.
Crocs’ expected earnings growth rate for the current year is 6.8%. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the past 60 days. CROX presently has a Zacks Rank #2.
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Traeger, Inc.
Traeger, Inc. provides wood pellet grills. COOK’s pellet grills utilize wood-fired convection power, owners can grill, smoke, bake, roast, braise and barbecue meals on one cooking system.
Traeger’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 100% over the past 60 days. COOK currently carries a Zacks Rank #2.
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DoubleDown Interactive Co., Ltd.
DoubleDown Interactive Co., Ltd. is a developer and publisher of digital social casino games. DDI is based in Seattle.
DoubleDown Interactive’s expected earnings growth rate for the current year is 15.8%. The Zacks Consensus Estimate for current-year earnings has improved 13.5% over the past 60 days. DDI currently sports a Zacks Rank #1.
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Royal Caribbean Cruises Ltd.
Royal Caribbean Cruises Ltd. owns and operates three global brands — Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Additionally, RCL has a 50% investment in a joint venture with TUI AG, which operates the brand TUI Cruises. Royal Caribbean Cruises’ cruise brands primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which also includes the budget and luxury segments.
Royal Caribbean Cruises’ expected earnings growth rate for the current year is 71.1%. The Zacks Consensus Estimate for current-year earnings has improved 4.2% over the past 60 days. RCL currently has a Zacks Rank #2.
Image Source: Zacks Investment Research
Mohawk Industries, Inc.
Mohawk Industries, Inc. is a leading global manufacturer of flooring products that enhance residential and commercial space. MHK manufactures carpets, rugs, ceramic tile, laminate, wood, stone and vinyl flooring.
Mohawk Industries’ expected earnings growth rate for the current year is 8.8%. The Zacks Consensus Estimate for current-year earnings has improved 4.8% over the past 60 days. MHK currently has a Zacks Rank #2.
Image Source: Zacks Investment Research
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Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
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