Cooling inflation has raised hopes that the Fed might soon end its monetary tightening cycle, which has sent the confidence of Americans soaring. Although fears of the economy slipping into a recession linger, many are now confident that the worst can now be avoided and the economy will soon rebound.

This saw consumer confidence jumping further in July. The Conference Board said on Jul 25 that consumer confidence jumped to 117 in July to hit its highest level in two years. The July reading also easily surpassed analysts’ expectations of a reading of 112 and was also way above June’s revised reading of 110.1.

More importantly, consumers’ expectations or the Expectations Index, which measures the outlook for business, income and labor market conditions over the upcoming six months, climbed to 88.3 in July from 80 in June. A reading of below 80 indicates a recession in the coming year.

Consumer confidence is making a steady and solid rebound as inflation has eased over the past few months and the Fed’s aggressive interest rate hike stance finally seems to bear fruit. The Fed increased interest rates, totaling 500 basis points, on 10 straight occasions from March 2021.

June’s consumer price index (CPI) reading and retail sales data indicate that consumers continued to spend more than they did a month ago as inflation eased. CPI increased 3% in June after rising 4% in May, to hit its lowest level since March 2021. Retail sales also grew 0.2%, indicating that people are spending more due to cooling commodity prices.

The central bank decided to keep interest rates unchanged in June for the first time after 15 months but Fed officials are expected to go for a 25-basis point rate hike on Jul 26. Even then, confidence among Americans is high as they believe that this could be the last of the hikes before the Fed ends its current monetary tightening cycle.

Moreover, the U.S. labor market is still resilient, adding to household confidence. The economy added 209,000 jobs in June, while annual hourly wages increased 4.4%.

Given this situation, it would be ideal to invest in consumer discretionary stocks.

Our Choices

Therefore, from an investment perspective, we have identified five stocks from this sector that are likely to capitalize on the rebound in consumer confidence. Each of these stocks carries a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

OneSpaWorld Holdings Limited OSW is a provider and innovator in the fields of wellness, beauty, rejuvenation and transformation on cruise ships and on land. OSW’s service includes traditional and alternative massage, body and skincare treatment options, ayurvedic treatments, comprehensive hair and nail services, fitness, acupuncture, herbal medicine, pain management and medi-spa.

OneSpaWorld Holdings’ expected earnings growth rate for the current year is 89.3%. The Zacks Consensus Estimate for current-year earnings has improved 10.4% over the past 90 days. OSW presently carries a Zacks Rank #2.

Marriott International, Inc. MAR is a leading worldwide hospitality company focused on lodging management and franchising, after the spin-off of its timeshare business into a publicly traded company in November 2011. During the first quarter of 2023, MAR added 79 new properties (11,015 rooms) to its worldwide lodging portfolio. At the end of first-quarter 2023, Marriott International’s development pipeline totaled 3,060 hotels, with approximately 502,000 rooms. Nearly 200,000 rooms were under construction.

Marriott International’s expected earnings growth rate for the current year is 26.1%. The Zacks Consensus Estimate for current-year earnings has improved 8.5% over the past 90 days. MAR has a Zacks Rank #2.

Lifetime Brands, Inc. LCUT is a leading designer, marketer and distributor of kitchenware, cutlery & cutting boards, bakeware & cookware, pantry ware & spices, tabletop and bath accessories. LCUT markets its products under various trade names, including Farberware, KitchenAid, Pfaltzgraff, Cuisinart, Hoffritz, Sabatier, Nautica, DBK-Daniel Boulud Kitchen, Joseph Abboud Environments, Roshco, Baker’s Advantage, Kamenstein, CasaModa, Kathy Ireland and USE.

Lifetime Brands’ expected earnings growth rate for the current year is 93.6%. The Zacks Consensus Estimate for current-year earnings has improved 9.1% over the past 90 days. LCUT presently carries a Zacks Rank #2.

Royal Caribbean Cruises Ltd. RCL 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 brand TUI Cruises. 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 more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 46.4% over the past 90 days. RCL currently has a Zacks Rank #2.

Norwegian Cruise Line Holdings Ltd. NCLH is a leading cruise line operator. NCLH owns and operates three brands — Oceania Cruises, Regent Seven Seas Cruises and Norwegian Cruise Line.

Norwegian Cruise Line Holdings’ expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 14.1% over the past 90 days. NCLH presently carries a Zacks Rank #2.

Marriott International, Inc. (MAR): Free Stock Analysis Report

Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report

Norwegian Cruise Line Holdings Ltd. (NCLH): Free Stock Analysis Report

Lifetime Brands, Inc. (LCUT): Free Stock Analysis Report

OneSpaWorld Holdings Limited (OSW): Free Stock Analysis Report

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