Source: Zhitong Finance
Author: Zhuang Lijia
Rising US interest rates are putting pressure on the US retail industry. The stock prices of many retail companies are being suppressed, but the stock prices of a few companies are still soaring. According to the data, the S&P 500 non-essential consumer goods and retail index has risen by nearly 14% this year, which is basically the same as the increase in the S&P 500 index since this year. However, most of the gains were concentrated in a few stocks, including the heavyweights$Amazon (AMZN.US)$The stock has risen nearly 21% since this year.
Analysts said that at the same time, retail companies focusing on low-income consumers are underperforming in part because this group of consumers is more affected by rising interest rates. These worst performing stocks include$Dollar Tree (DLTR.US)$und$Dollar General (DG.US)$Since this year, it has declined by nearly 27% and nearly 9%, respectively.
In addition to real estate, retail is one of several sectors of the economy clearly under pressure to raise interest rates. The Federal Reserve reiterated earlier this week that it needed to see more evidence of cooling inflation before cutting interest rates. Greg Halter, head of research at Carnegie Investment Counsel (Carnegie Investment Counsel), said, “Low- and middle-income people are being squeezed due to rising gasoline prices and grocery prices. Even when the economy is doing well, they feel terrible.”
US retail sales data for May will be released next week. The market currently expects retail sales in the US to increase 0.3% month-on-month in May. Data released earlier this week showed encouraging progress in inflation, and less-than-expected results may support the Federal Reserve to relax monetary policy as soon as possible. The futures market reflects an increase in investors' expectations that the Federal Reserve will cut interest rates in September.
The different performance of retail stocks has led investors to focus on companies where consumers can continue to afford high interest rates, or companies that offer discounts on household items such as clothing or groceries, such as$Costco (COST.US)$.
According to reports, Greg Halter's funds have been buying$Walmart (WMT.US)$, Costco, and$TJX Companies (TJX.US)$Wait for stocks. The business models of these companies all emphasize creating value for consumers, and their stock prices have risen by 28%, 29%, and 16%, respectively, since this year.
Robert Pavlik, senior portfolio manager at Dakota Wealth Management, holds shares in Costco and TJX, and notes that both companies have strong management and inventory control. He said, “I think inflation will continue, but it will be moderate, and consumers will still seek to make the most of their dollars.”
Bokeh Capital Partners holds$Urban Outfitters (URBN.US)$The stock has risen more than 20% since this year. Kim Forrest, chief investment officer at Bokeh Capital Partners, said that Urban Outfitters' strength as a fashion dealer helped the company get through the inflationary environment, adding: “People sacrifice things to look good.”
Josh Cummings, portfolio manager at Janus Henderson Investors, believes that even if interest rates remain high, fields such as online shopping will continue to thrive. He's always watching$Carvana (CVNA.US)$und$DoorDash (DASH.US)$As for the company, the former's stock price has almost doubled this year, while the latter's share price has risen by about 13%. “We are not very optimistic about the overall outlook for the consumer sector,” he said. But we do think we're in the early stages of some growth stories.”
Editor/Jeffy