- This week should bring more strong earnings results
- Consumers most positive in 13 years
- Goldman Sachs expects some stocks to rise by up to 44%
This week should bring more robust Q2 earnings results from various consumer firms. Retailers including Home Depot and Walmart will release their Q2 results and outlooks for the full year by week’s end.
Despite the US-China trade conflict, increasing wages and a strong stock market should prompt consumer firms to express optimism over holiday and back-to-school shopping.
The Consumer Discretionary Select Sect SPDR electronically traded fund has strengthened by 13% so far in 2018, exceeding the S&P 500’s 5%.
In other stock market news, a survey conducted by Goldman Sachs among 2,000 consumers showed levels of optimism last seen in 2005, with pessimism at an all-time low. High earners are particularly optimistic, but those in the $50,000 to $90,000 income bracket are also at their most optimistic in eight years.
Goldman Sachs Consumer Analyst Matthew Fassler said that buoyant consumer sentiment and robust demand drivers can clearly be seen from consumer spending, with total goods sales (excluding food/energy/auto) and retail sales posting peak growth rates during the final quarter of 2017 before fading slightly in May, June and July.
He added: “Growth in consumer net worth, meanwhile, has been resurgent, powered by a mix of real estate appreciation and strong financial markets, and growing at annual rates of 6% to 9% in each of the past seven quarters.”
He said that they were optimistic about continued consumer recovery because spending drivers remain robust despite recent signs of moderation, particularly in housing.
Here are the seven consumer stocks on the firm’s “Conviction Buy List” at the moment, along with their respective upside potentials:
- McDonald’s (+12%)
- Tapestry (+14%)
- Performance Food Group (+19%)
- Mondelez International (+23%)
- Las Vegas Sands (+31%)
- Aramark Holdings (+38%)
- Wyndham Hotels (+44%)
