The consumer discretionary sector has not been having a great 2024. Since the start of the year, the S&P 500 Consumer Discretionary Select Sector SPDR (XLY) has slid 1.4% till last Friday. However, with inflation numbers starting to cool off, the sector wrested its slide somewhat in May, rising 0.2%.

Usually, when the economy expands, companies engaged in such businesses do well. The opposite happens when an economy shows signs of slowing down. However, inflation historically has the most far-reaching impact on consumer discretionary stocks. When prices of consumer goods are in a state of continuous increase, people control their spending on non-essential goods.

U.S. consumer prices increased modestly in April and came in cooler than expected. The Department of Labor reported that the Consumer Price Index (CPI) increased 0.3% month over month in April compared with the consensus estimate of 0.4%. Core inflation came in line with expectations, at a 0.3% increase. But the most significant inflation metric, perhaps, was released on the last day of the month.

PCE Inflation, which is often considered to be the Fed’s favorite inflation indicator, dropped 0.1% in April. This follows the March number, which was revised down to 0.4% from the previously reported 0.5%.

April was the month when retail sales came in flat. Delay in rate-cutting by the Fed was starting to have an adverse impact on customer attitude. However, with the inflation metrics now showing clear signs of slowing down, there will be further purchasing power in consumers' pockets, and on cue, spending on non-essentials should increase. Hence, astute investors should consider betting on consumer discretionary stocks at present.

Our Picks

We have, thus, selected three consumer discretionary stocks for this purpose. These stocks below flaunt a Zacks Rank #1 (Strong Buy) or #2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum; the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here

Royal Caribbean Cruises Ltd. (RCL Quick QuoteRCL - Free Report) is a global cruise company.

Royal Caribbean’s expected earnings growth rate for the current year is 63.7%. The Zacks Consensus Estimate for its current-year earnings has improved 10.7% over the past 60 days. The company has a Zacks Rank #1 and a VGM Score of B.

Canada Goose Holdings Inc. (GOOS Quick QuoteGOOS - Free Report) is a manufacturer of performance luxury apparel for men, women, youth, children and babies worldwide.

Canada Goose’s expected earnings growth rate for the current year is 13.7%. The Zacks Consensus Estimate for its current-year earnings has improved 6.4% over the past 60 days. The company has a Zacks Rank #1 and a VGM Score of A.

Lifetime Brands, Inc. (LCUT Quick QuoteLCUT - Free Report) engages in the business of manufacturing and selling kitchenware, tableware and other home products.

Lifetime Brands’ expected earnings growth rate for the current year is 40.4%. The Zacks Consensus Estimate for its current-year earnings has improved 1.4% over the past 60 days. The company has a Zacks Rank #2 and a VGM Score of A.