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Biggest Rate Cut in 16 Years: 4 Consumer Discretionary Stocks to Buy
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The Federal Reserve cut interest rates by 50 basis points on Wednesday, its first rate cut since March 2020 and the biggest in more than 16 years. The last time the Fed cut interest rates by half a percentage point was in 2008, with just an emergency exception during the pandemic.
A 50-basis point rate cut will boost the broader economy, with growth stocks likely to gain the most. It would thus be prudent to invest in discretionary stocks. We have narrowed our search to four consumer discretionary stocks such as Traeger, Inc. (COOK - Free Report) , Lincoln Educational Services Corporation (LINC - Free Report) , Reynolds Consumer Products Inc. (REYN - Free Report) and Royal Caribbean Cruises Ltd. (RCL - Free Report) with upside for 2024.
The Federal Reserve’s decision to start its rate cut cycle was almost certain. However, the financial community was unsure about the size of the rate cut. A 25-basis point rate cut was almost assured but several market participants were anticipating a half a percentage point rate cut given the soft economic data released ahead of the Federal Open Market Committee meeting.
"The committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance," the FOMC said in a press release.
The benchmark policy rate now ranges between 4.75% and 5.00%, the lowest level since April 2023.
Moreover, the Fed’s new dot-plot indicates a Fed funds rate at 4.25-4.50% by the year-end, with a full percentage point reduction projected for 2025 and another half-point cut in 2026. This would bring the rate to a final range of 2.75%-3%.
Consumer Discretionary Stocks to Gain
Consumer discretionary stocks are considered growth assets, which are inversely related to market interest rates. Growth investors concentrate on stocks that demonstrate rapid earnings or revenue expansion, expecting these factors to drive future stock price increases.
A rate cut will help companies as it will lower production costs and provide access to inexpensive credit.
Also, the U.S. economy is growing at a solid pace. U.S. GDP grew 3% in the second quarter after slowing down in the first quarter. The Atlanta Fed also upwardly revised its third-quarter GDP growth estimate to an annual rate of 3% from the earlier projected rate of 2.5%.
4 Consumer Discretionary Stocks With Upside Potential:
Traeger
Traeger 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 and has a Growth Score of A.
Image Source: Zacks Investment Research
Lincoln Educational Services
Lincoln Educational Services is a leading and diversified for-profit provider of career-oriented post-secondary education headquartered in West Orange, New Jersey. LINC offers recent high school graduates and working adults degree and diploma programs in four principal areas of study: automotive technology, allied health (which includes programs for medical administrative assistants, medical assistants, pharmacy technicians and massage therapists), skilled trades and business and information technology.
Lincoln Educational Services’ expected earnings growth rate for the current year is 4.1%. The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the past 60 days. LINC currently carries a Zacks Rank #2 and has a Growth Score of A.
Image Source: Zacks Investment Research
Reynolds Consumer Products
Reynolds Consumer Products is a consumer-branded and private-label products company. REYN produces and sells branded and store-brand products, which include cooking products, waste & storage products and tableware.
Reynolds Consumer Products’ expected earnings growth rate for the current year is 19%. The Zacks Consensus Estimate for current-year earnings has improved 1.8% over the past 60 days. REYN currently carries a Zacks Rank #2 and has a Growth Score of B.
Image Source: Zacks Investment Research
Royal Caribbean Cruises Ltd.
Royal Caribbean Cruises 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 TUI Cruises brand. 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 71.2%. The Zacks Consensus Estimate for current-year earnings has improved 3.9% over the past 60 days. RCL currently has a Zacks Rank #2 and a Growth Score of A.
Image Source: Zacks Investment Research
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Biggest Rate Cut in 16 Years: 4 Consumer Discretionary Stocks to Buy
The Federal Reserve cut interest rates by 50 basis points on Wednesday, its first rate cut since March 2020 and the biggest in more than 16 years. The last time the Fed cut interest rates by half a percentage point was in 2008, with just an emergency exception during the pandemic.
A 50-basis point rate cut will boost the broader economy, with growth stocks likely to gain the most. It would thus be prudent to invest in discretionary stocks. We have narrowed our search to four consumer discretionary stocks such as Traeger, Inc. (COOK - Free Report) , Lincoln Educational Services Corporation (LINC - Free Report) , Reynolds Consumer Products Inc. (REYN - Free Report) and Royal Caribbean Cruises Ltd. (RCL - Free Report) with upside for 2024.
Each of these stocks has a Zacks Rank #1 (Strong Buy) or #2 (Buy) and a Growth Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lower Interest Rates to Boost Economy
The Federal Reserve’s decision to start its rate cut cycle was almost certain. However, the financial community was unsure about the size of the rate cut. A 25-basis point rate cut was almost assured but several market participants were anticipating a half a percentage point rate cut given the soft economic data released ahead of the Federal Open Market Committee meeting.
"The committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance," the FOMC said in a press release.
The benchmark policy rate now ranges between 4.75% and 5.00%, the lowest level since April 2023.
Moreover, the Fed’s new dot-plot indicates a Fed funds rate at 4.25-4.50% by the year-end, with a full percentage point reduction projected for 2025 and another half-point cut in 2026. This would bring the rate to a final range of 2.75%-3%.
Consumer Discretionary Stocks to Gain
Consumer discretionary stocks are considered growth assets, which are inversely related to market interest rates. Growth investors concentrate on stocks that demonstrate rapid earnings or revenue expansion, expecting these factors to drive future stock price increases.
A rate cut will help companies as it will lower production costs and provide access to inexpensive credit.
Also, the U.S. economy is growing at a solid pace. U.S. GDP grew 3% in the second quarter after slowing down in the first quarter. The Atlanta Fed also upwardly revised its third-quarter GDP growth estimate to an annual rate of 3% from the earlier projected rate of 2.5%.
4 Consumer Discretionary Stocks With Upside Potential:
Traeger
Traeger 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 and has a Growth Score of A.
Image Source: Zacks Investment Research
Lincoln Educational Services
Lincoln Educational Services is a leading and diversified for-profit provider of career-oriented post-secondary education headquartered in West Orange, New Jersey. LINC offers recent high school graduates and working adults degree and diploma programs in four principal areas of study: automotive technology, allied health (which includes programs for medical administrative assistants, medical assistants, pharmacy technicians and massage therapists), skilled trades and business and information technology.
Lincoln Educational Services’ expected earnings growth rate for the current year is 4.1%. The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the past 60 days. LINC currently carries a Zacks Rank #2 and has a Growth Score of A.
Image Source: Zacks Investment Research
Reynolds Consumer Products
Reynolds Consumer Products is a consumer-branded and private-label products company. REYN produces and sells branded and store-brand products, which include cooking products, waste & storage products and tableware.
Reynolds Consumer Products’ expected earnings growth rate for the current year is 19%. The Zacks Consensus Estimate for current-year earnings has improved 1.8% over the past 60 days. REYN currently carries a Zacks Rank #2 and has a Growth Score of B.
Image Source: Zacks Investment Research
Royal Caribbean Cruises Ltd.
Royal Caribbean Cruises 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 TUI Cruises brand. 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 71.2%. The Zacks Consensus Estimate for current-year earnings has improved 3.9% over the past 60 days. RCL currently has a Zacks Rank #2 and a Growth Score of A.
Image Source: Zacks Investment Research