Fears of a slowing economy have been gripping markets for a while now and it is unlikely that the Federal Reserve will go for a rate cut anytime soon. In fact, concerns have grown that the Fed could go for just one rate cut this year as it struggles to bring down inflation.
A sharp jump in inflation has forced the Fed to maintain a cautious approach, with consumer confidence and sentiment plummeting to new lows.
Given this situation, it would be safe to invest in consumer staples stocks, which are considered defensive. In this regard, Carriage Services, Inc. CSV, Lancaster Colony Corporation LANC, Tyson Foods TSN and Molson Coors Beverage Company TAP are good picks. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Moreover, the stocks are from the low-beta category (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high-dividend yield and a favorable Zacks Rank.
A batch of economic data released in February reignited fears of a slowing economy. The manufacturing sector has been struggling to make a rebound for months, while the retail sector, which has been facing challenges to see a substantial jump in sales, took a major blow last month. Retail sales declined 0.9% in January, recording its biggest drop in nearly two years.
Inflation has also been on the rise over the past three months. The Labor Department reported that the consumer price index (CPI) rose 0.5% in January, following a 0.4% increase in December. This marks the largest jump since August 2023 and exceeds analysts' expectations of a 0.3% rise.
From the year-ago levels, CPI climbed 3% in January, up from 2.9% in December, marking the highest annual gain since April 2024. Core CPI, which excludes food and energy costs, rose 0.4% month over month after a 0.2% increase in December.
Disappointing economic data saw consumer confidence decline for the third straight month. The Conference Board’s consumer survey index fell to 98.3 in February, which came in below the consensus estimate of 102.3, and recorded the biggest decline since August 2021. Consumer confidence also hit its lowest level since June 2024 in February.
Although inflation declined sharply over the past year, it remains a major challenge for consumers and the Federal Reserve. Despite the Fed adopting an aggressive monetary tightening policy that saw it hike interest rates by 525 basis points, it has struggled to bring inflation down to its 2% target.
With persistent inflation, a Federal Reserve rate cut is unlikely before the second half of the year. The central bank previously reduced interest rates by 100 basis points across three meetings starting September 2024, as inflation showed signs of easing. However, renewed inflationary pressures in late 2024 forced the Fed to reconsider further cuts. In January, it paused rate cuts, keeping its benchmark policy rate unchanged in the current range of 4.25-4.5%.
Markets are pricing in a 93% chance of the central bank leaving interest rates unchanged in March and a 71.8% chance in May, according to the CME FedWatch Tool.
Adding to economic uncertainty, President Donald Trump’s tariff threats on multiple countries, including China, Canada, Mexico and the European Union, escalated fears of a trade war. The trade tensions could further weigh on markets in the months ahead.
Carriage Services, Inc. is a leading provider of death care services and products in the United States. CSV provides a complete range of services relating to funerals, burials and cremations, including the use of funeral homes and motor vehicles, the performance of cemetery interment services and the management and maintenance of cemetery grounds.
Carriage Services has an expected earnings growth rate of 7.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last 60 days. CSV presently carries a Zacks Rank #2. Carriage Services has a beta of 0.91 and a current dividend yield of 1.12%.
Lancaster Colony Corporation is a manufacturer and marketer of specialty food products for the retail and foodservice markets. LANC’s wholly-owned subsidiaries, including T. Marzetti Company, produce and market high-quality national and regionally-branded food products throughout the United States for the retail and foodservice markets.
Lancaster Colony Corporation has an expected earnings growth rate of 6.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the last 60 days. LANC presently has a Zacks Rank #2. Lancaster Colonyhas a beta of 0.31 and a current dividend yield of 1.99%.
Tyson Foods is the biggest U.S. chicken company that produces, distributes and markets chicken, beef, pork, as well as prepared foods. TSN’s products are marketed and sold primarily by sales staff to grocery retailers, grocery wholesalers, meat distributors, military commissaries, industrial food processing companies, chain restaurants, international export companies and domestic distributors.
Tyson Foods’expected earnings growth rate for the current year is 22.6%. The Zacks Consensus Estimate for the current-year earnings has improved 8.3% over the past 60 days. TSN currently carries a Zacks Rank #2. Tyson Foods has a beta of 0.72 and a current dividend yield of 3.26%.
Molson Coors Beverage Company, the global manufacturer and seller of beer and other beverage products, has an impressive diverse portfolio of owned and partner brands. TAP’s brands include global priority brands such as Blue Moon, Miller Lite, CoorsBanquet, Coors Light, Miller Genuine Draft and Staropramen, as well as regional champion brands like Carling and Molson Canadian.
Molson Coors Beverage Company’s expected earnings growth rate for the current year is 6.5%. The Zacks Consensus Estimate for current-year earnings has improved 6.4% over the past 60 days. TAP presently sports a Zacks Rank #1. Molson Coors has a beta of 0.81 and a current dividend yield of 3.07%.
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