Market Rally Resumes After Federal Reserve Rate Cut
The Dow and the Nasdaq closed at fresh record highs on Thursday, as investors regained confidence following the Federal Reserve’s announcement of a quarter percentage point rate cut. This move has eased inflation substantially, and the Federal Reserve has raised its GDP forecast for the year. With positive sentiment in the market, investing in consumer discretionary stocks seems like a wise decision.
What Led to the Rate Cut
The Federal Reserve cut its interest rate by 25 basis points, taking its benchmark policy rate to the range of 4-4.25%. This rate cut was highly anticipated due to growing concerns over a struggling labor market and a slowing economy. The latest data showed that job additions to the economy have been shrinking over the past few months, raising fears of an economic crisis. The rate cut is primarily aimed at balancing the economy.
Future Rate Cuts and Their Impact
Federal Reserve Chairman Jerome Powell hinted at two more 25-basis-point rate cuts this year, which will take the benchmark policy rate to a range of 3.5-3.75% by December. The central bank also raised its economic growth forecast in the Summary of Economic Projections (SEP) report. Lower borrowing costs are likely to boost several sectors, including consumer discretionary stocks.
5 Discretionary Stocks With Growth Potential
Several consumer discretionary stocks have shown promising growth potential. These include:
- Boyd Gaming Corporation (BYD)
- Norwegian Cruise Line Holdings Ltd. (NCLH)
- Ralph Lauren Corporation (RL)
- Hasbro, Inc. (HAS)
- Grand Canyon Education, Inc. (LOPE)
Each of these stocks currently has a Zacks Rank #1 (Strong Buy) and assures good returns.
Boyd Gaming Corporation
Boyd Gaming Corporation is a multi-jurisdictional gaming company that owns and operates gaming entertainment properties in several states. The company’s expected earnings growth rate for the current year is 5.2%. The Zacks Consensus Estimate for current-year earnings improved 4.9% over the last 60 days.
Norwegian Cruise Line Holdings Ltd.
Norwegian Cruise Line Holdings Ltd. is a leading cruise line operator that owns and operates three brands — Oceania Cruises, Regent Seven Seas Cruises, and Norwegian Cruise Line. The company’s expected earnings growth rate for the current year is 13.7%. The Zacks Consensus Estimate for current-year earnings has improved 3% over the past 60 days.
Ralph Lauren Corporation
Ralph Lauren Corporation is a major designer, marketer, and distributor of premium lifestyle products. The company offers products in apparel, footwear, accessories, home furnishings, and other licensed product categories. Ralph Lauren’s expected earnings growth rate for the current year is 19.8%. The Zacks Consensus Estimate for the current-year earnings has improved 8.4% over the past 60 days.
Hasbro, Inc.
Hasbro, Inc. is engaged in the design, manufacture, and marketing of games and toys. The company offers traditional, high-tech, and digital toys, games, and licensed products under various well-known brands. Hasbro’s expected earnings growth rate for the current year is 21.5%. The Zacks Consensus Estimate for current-year earnings has improved 14.6% over the past 60 days.
Grand Canyon Education, Inc.
Grand Canyon Education, Inc. is a regionally accredited provider of online postsecondary education services. The company offers graduate and undergraduate degree programs in its core disciplines of education, business, and healthcare. Grand Canyon Education’s expected earnings growth rate for the current year is 12.8%. The Zacks Consensus Estimate for current-year earnings has improved 3.7% over the past 60 days.
Conclusion
The Federal Reserve’s rate cut and hints at future cuts have boosted investor confidence, making consumer discretionary stocks an attractive investment option. With their promising growth potential, Boyd Gaming Corporation, Norwegian Cruise Line Holdings Ltd., Ralph Lauren Corporation, Hasbro, Inc., and Grand Canyon Education, Inc. are worth considering for investment. As the economy is expected to grow, these stocks are likely to perform well, providing good returns to investors.
