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Investing in Consumer Staples Amidst Rising Inflation

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Wall Street finds itself riding a rollercoaster of volatility following a robust start to the year. Inflation made an unwelcome return in February, shaking investor confidence and dispelling hopes of an imminent rate cut.

In February, the consumer price index (CPI) surged by 0.4%, surpassing January’s 0.3% rise. This increase marked the most significant jump since September 2023, signaling a stark contrast to the steady decline in inflation that followed, dipping below 3% before the recent climb in January.

On a year-over-year basis, CPI saw a 3.2% jump in February, building on the 3.1% increase from the previous month.

Core CPI, which excludes the volatile energy and food prices, also saw a 0.4% sequential increase in February and a 3.8% rise from year-ago levels.

The market witnessed a shift as declining inflation prompted the Federal Reserve to halt its monetary tightening initiative in late 2023. The decision garnered praise as the Federal Reserve indicated anticipated multiple rate cuts for the year following a substantial 525-basis-point interest rate hike since March 2022.

Regrettably, any hope for an imminent rate cut in March has been quashed by the resurgence of inflation in the first two months of 2024. The Federal Reserve now asserts that it will only consider a rate cut when confident after closely monitoring inflation data. As a result, market participants now forecast the earliest rate cut not taking place until the Fed’s June FOMC meeting.

The increased interest rates and uncertainty surrounding the timing of the first rate cut are poised to keep markets volatile for an extended period.

Investing Recommendations

Given the current circumstances, a prudent move would be to explore investments in five defensive consumer staples, such as The Clorox Company (CLX), Grocery Outlet Holding Corp. (GO), Molson Coors Beverage Company (TAP), Tyson Foods (TSN), and Pilgrim’s Pride Corporation (PPC). These companies boast a favorable Zacks Rank and are likely to fortify one’s portfolio, with each holding a Zacks Rank #1 (Strong Buy) or #2 (Buy).

Let’s dive into the specifics of each:

The Clorox Company (CLX)

The Clorox Company is involved in producing, marketing, and selling consumer products in the United States and international markets. The company distributes its products through mass merchandisers, grocery stores, and other retail outlets.

Current-year expected earnings growth rate for The Clorox Company stands at 5.6%, with a Zacks Consensus Estimate showing a 21.6% improvement over the last 60 days. CLX currently holds a Zacks Rank #2.

Grocery Outlet Holding Corp. (GO)

Grocery Outlet Holding Corp. serves as a high-growth, extreme-value retailer of quality, name-brand consumables and fresh products through a network of independently owned and operated stores. The company offers a unique shopping experience in “small-box” stores ranging from 15,000-20,000 square feet.

With an expected earnings growth rate of 10.3% for the current year, Grocery Outlet has seen a 2.6% improvement in the Zacks Consensus Estimate for current-year earnings over the last 60 days. GO currently holds a Zacks Rank #2.

Molson Coors Beverage Company (TAP)

Molson Coors Beverage Company is a global manufacturer and seller of beer and other beverage products, boasting a diverse portfolio of owned and partner brands. TAP’s offerings include global priority brands like Blue Moon, Miller Lite, CoorsBanquet, Coors Light, Miller Genuine Draft, and Staropramen, along with regional champion brands such as Carling and Molson Canadian.

For the current year, Molson Coors Beverage Company anticipates an earnings growth rate of 4.2%, with the Zacks Consensus Estimate showing a 4.6% uptick over the past 60 days. TAP currently holds a Zacks Rank #2.

Tyson Foods (TSN)

Tyson Foods stands as the largest U.S. chicken company, involved in the production, distribution, and marketing of chicken, beef, pork, and prepared foods. TSN markets its products primarily through various channels to grocery retailers, wholesalers, military commissaries, chain restaurants, and more.

With an expected earnings growth rate of 74.6% for the current year, Tyson Foods has seen a 23.2% improvement in the Zacks Consensus Estimate for current-year earnings over the past 60 days. TSN currently holds a Zacks Rank #1.

Pilgrim’s Pride Corporation (PPC)

Pilgrim’s Pride Corporation focuses on the processing, production, marketing, and distribution of frozen, fresh, and value-added chicken products. PPC extends its services in the United States, Mexico, France, the Netherlands, Puerto Rico, and Mexico through multiple distributors, retailers, and food service operators.

For the current year, Pilgrim’s Pride anticipates an earnings growth rate of 68.6%, with the Zacks Consensus Estimate showing a 14.9% increase over the past 60 days. PPC currently holds a Zacks Rank #1.

For investors looking for shelter in the storm of market volatility, these consumer staples could provide a safe harbor in uncertain times.

Another Lucrative Industry Opportunity

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Zacks Investment Research unveils a critical special report, “Oil Market on Fire,” highlighting four unforeseen oil and gas stocks poised for substantial growth in the ensuing weeks and months. This report offers an insider look into these lucrative opportunities that investors won’t want to overlook.

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Investors seeking financial foresight and resilience in volatile markets can leverage the strategic guidance offered by these investment opportunities.

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