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4 Discretionary Stocks to Buy as Inflation Continues to Cool
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Key Takeaways
April PCE rose just 0.1% month over month, while core PCE posted its smallest annual gain since 2021.
Personal income climbed 0.8% and consumer spending rose 0.2% in April, showing economic resilience.
Tariffs were paused and trade talks resumed, easing recession fears and boosting market optimism.
Inflation is finally showing signs of cooling, and consumer spending is increasing. The Commerce Department reported on Friday that inflation rose only slightly in April, a positive sign for the economy after it contracted in the first quarter of 2025.
President Donald Trump’s tariffs, which were announced in early April, have been put on hold as trade negotiations with several countries are ongoing. Also, consumer confidence rebounded in May, indicating that people now have more faith in the economy’s prospects.
Given the positive sentiment, it would be prudent to invest in consumer discretionary stocks such as Interface, Inc. (TILE - Free Report) , Kontoor Brands, Inc. (KTB - Free Report) , GDEV Inc. (GDEV - Free Report) and Netflix, Inc. (NFLX - Free Report) .
The Commerce Department reported that in April, the personal consumption expenditure (PCE) index, the Federal Reserve’s key inflation gauge, rose 0.1% sequentially and 2.1% from year-ago levels, after increasing 2.3% in March.
Core PCE, which strips out the volatile food and energy components, rose 0.1% month over month in April and 2.5% from the year-ago levels, the smallest advance since March 2021. The Federal Reserve tracks PCE for its 2% inflation target. April’s reading suggests inflation is on track to meet the Fed’s target. Consumer spending slowed in April but still increased 0.2% month over month. Personal income also rose 0.8% sequentially in April.
Inflation has been showing signs of cooling over the past few months. However, sweeping tariffs announced by Trump in early April rattled Wall Street as concerns grew that higher import duties could trigger inflation and push the economy into a recession.
However, those fears have subsided over the past month after the tariffs were temporarily paused and the United States initiated trade talks with several countries, including China. The White House also announced a trade deal with the UK last month. Slowing inflation and fading trade war fears have raised hopes that the Federal Reserve could soon resume its rate cuts. Also, higher personal income and consumer spending signal a resilient economy.
4 Discretionary Stocks With Growth Potential
Given the positive sentiment, it would be ideal to invest in consumer discretionary stocks.
Interface
Interface, Inc. is the world's largest manufacturer of modular carpets, which it markets under the Interface and FLOR brands. TILE is committed to the goal of sustainability and doing business in ways that minimize the impact on the environment while enhancing shareholder value.
Interface’s expected earnings growth rate for the current year is 8.2%. The Zacks Consensus Estimate for current-year earnings has improved by 2.6% over the past 60 days. TILE presently has a Zacks Rank #2.
Kontoor Brands
Kontoor Brands, Inc. is an apparel company. KTB designs, manufactures and distributes products. KTB’s brand consists of Wrangler, Lee and Rock & Republic. Kontoor Brands Inc. is based in Greensboro.
Kontoor Brands’ expected earnings growth rate for the current year is 9.6%. The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the past 60 days. KTB currently carries a Zacks Rank #2.
GDEV Inc.
GDEV Inc. is a gaming and entertainment powerhouse, focused on growing and enhancing its portfolio of studios. GDEV’s diverse range of subsidiaries, including Nexters, Cubic Games, Dragon Machines and more.
GDEV’s expected earnings growth rate for the current year is 58%. The Zacks Consensus Estimate for current-year earnings has improved 21.8% over the past 60 days. GDEV currently carries a Zacks Rank #2.
Netflix
Netflix, Inc. is considered a pioneer in the streaming space. NFLX has been spending aggressively on building its portfolio of original shows. This is helping Netflix sustain its leading position despite the launch of new services like Disney+ and Apple TV+, as well as existing services like Amazon Prime Video.
Netflix’s expected earnings growth rate for the current year is 27.7%. The Zacks Consensus Estimate for current-year earnings has improved 3% over the past 60 days. NFLX currently carries a Zacks Rank #2.
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4 Discretionary Stocks to Buy as Inflation Continues to Cool
Key Takeaways
Inflation is finally showing signs of cooling, and consumer spending is increasing. The Commerce Department reported on Friday that inflation rose only slightly in April, a positive sign for the economy after it contracted in the first quarter of 2025.
President Donald Trump’s tariffs, which were announced in early April, have been put on hold as trade negotiations with several countries are ongoing. Also, consumer confidence rebounded in May, indicating that people now have more faith in the economy’s prospects.
Given the positive sentiment, it would be prudent to invest in consumer discretionary stocks such as Interface, Inc. (TILE - Free Report) , Kontoor Brands, Inc. (KTB - Free Report) , GDEV Inc. (GDEV - Free Report) and Netflix, Inc. (NFLX - Free Report) .
These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Inflation Slows Further in April
The Commerce Department reported that in April, the personal consumption expenditure (PCE) index, the Federal Reserve’s key inflation gauge, rose 0.1% sequentially and 2.1% from year-ago levels, after increasing 2.3% in March.
Core PCE, which strips out the volatile food and energy components, rose 0.1% month over month in April and 2.5% from the year-ago levels, the smallest advance since March 2021. The Federal Reserve tracks PCE for its 2% inflation target. April’s reading suggests inflation is on track to meet the Fed’s target. Consumer spending slowed in April but still increased 0.2% month over month. Personal income also rose 0.8% sequentially in April.
Inflation has been showing signs of cooling over the past few months. However, sweeping tariffs announced by Trump in early April rattled Wall Street as concerns grew that higher import duties could trigger inflation and push the economy into a recession.
However, those fears have subsided over the past month after the tariffs were temporarily paused and the United States initiated trade talks with several countries, including China. The White House also announced a trade deal with the UK last month. Slowing inflation and fading trade war fears have raised hopes that the Federal Reserve could soon resume its rate cuts. Also, higher personal income and consumer spending signal a resilient economy.
4 Discretionary Stocks With Growth Potential
Given the positive sentiment, it would be ideal to invest in consumer discretionary stocks.
Interface
Interface, Inc. is the world's largest manufacturer of modular carpets, which it markets under the Interface and FLOR brands. TILE is committed to the goal of sustainability and doing business in ways that minimize the impact on the environment while enhancing shareholder value.
Interface’s expected earnings growth rate for the current year is 8.2%. The Zacks Consensus Estimate for current-year earnings has improved by 2.6% over the past 60 days. TILE presently has a Zacks Rank #2.
Kontoor Brands
Kontoor Brands, Inc. is an apparel company. KTB designs, manufactures and distributes products. KTB’s brand consists of Wrangler, Lee and Rock & Republic. Kontoor Brands Inc. is based in Greensboro.
Kontoor Brands’ expected earnings growth rate for the current year is 9.6%. The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the past 60 days. KTB currently carries a Zacks Rank #2.
GDEV Inc.
GDEV Inc. is a gaming and entertainment powerhouse, focused on growing and enhancing its portfolio of studios. GDEV’s diverse range of subsidiaries, including Nexters, Cubic Games, Dragon Machines and more.
GDEV’s expected earnings growth rate for the current year is 58%. The Zacks Consensus Estimate for current-year earnings has improved 21.8% over the past 60 days. GDEV currently carries a Zacks Rank #2.
Netflix
Netflix, Inc. is considered a pioneer in the streaming space. NFLX has been spending aggressively on building its portfolio of original shows. This is helping Netflix sustain its leading position despite the launch of new services like Disney+ and Apple TV+, as well as existing services like Amazon Prime Video.
Netflix’s expected earnings growth rate for the current year is 27.7%. The Zacks Consensus Estimate for current-year earnings has improved 3% over the past 60 days. NFLX currently carries a Zacks Rank #2.