You must have braced yourself for a rate hike, if you have followed the tide. As widely expected, the Federal Reserve raised the benchmark interest rate by a quarter percentage point for the third time this year to a range of 1.25-1.5%. This clearly signals that the economy is in good health with inflation gradually crawling toward the desired 2% target and job market remaining robust. Together, these have set the stage for a rate hike.
The policy makers had trimmed the rate at a time when the economy had slipped into recession, and since then it has been treading cautiously and considering all the economic aspects before arriving at a decision over the rate hike. This is the fifth time that the Fed officials have raised the interest rate, since the financial crisis.
The Fed, who have chalked out a detailed plan to shrink $4.5 trillion portfolio of Treasury bonds and mortgage-backed securities, continue to advocate three more hikes next year on expectations of strengthening job market. We noted that the U.S. economy added a robust 228,000 jobs in November, while the unemployment rate continues to hover around at its 17-year low rate of 4.1%.
The Chairperson expects the unemployment rate to be around the current level at the end of 2017 but anticipates the same to dip 20 basis points to 3.9% in 2018. Industry experts believe that the labor market is likely to get a major boost from Trump’s tax reform policy. The new tax code once implemented will lower the burden of corporates, spur domestic investments and stimulate economic growth.
Janet Yellen, whose term ends in February, pointed that any rational tax reform that triggers economic activities, helps create jobs and increase wages are always welcome. The Fed now envisions economy to grow at a rate of 2.5% in both 2017 and 2018, up from its previous forecast of 2.4% and 2.1%, respectively.
Certainly, things are looking well placed at the very moment unless an unprecedented event disrupts the same. So, let’s focus on sectors that are likely to benefit from the move and pick some value-intrinsic stocks. Here we have highlighted four value stocks from consumer discretionary and financial sectors that have a favorable combination of a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Value Score of A or B.
4 Prominent Picks
We suggest investing in Tailored Brands Inc (NYSE:TLRD) with a long-term earnings growth rate of 16.5% and a Value Score of A. This operator of specialty apparel retailer delivered an average positive earnings surprise of 7.7% in the trailing four quarters. The company sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
You may also consider PVH Corp (NYSE:PVH), which operates as an apparel company. The company posted an average positive earnings surprise of 2.6% in the trailing four quarters. This Zacks Rank #2 company has a long-term earnings growth rate of 13% and a Value Score of B.
MetLife Inc (NYSE:MET), provider of life insurance, annuities, employee benefits and asset management products, with a long-term earnings growth rate of 9% and a Zacks Rank #2 is a solid bet. The company posted an average positive earnings surprise of 9.6% in the trailing four quarters and has a Value Score of A.
Investors can count on Citizens Financial Group Inc (NYSE:CFG), which operates as the bank holding company for Citizens Bank, N.A. and Citizens Bank of Pennsylvania that provide retail and commercial banking products and services. This Zacks Rank #2 company has a long-term earnings growth rate of 15.1% and a Value Score of B. The company posted an average positive earnings surprise of 9.1% in the preceding four quarters.
Zacks Editor-in-Chief Goes “All In” on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.