Is inflation finally cooling off? And if not, when will it finally start to subside?
These questions have plagued investors throughout 2022. The year has already seen several interest rate hikes from the Federal Reserve. Even more hikes are looming, too. At times like these, it can be hard to believe inflationary trends will ever cool. According to recent reports, though, there may be a light at the end of the tunnel.
Inflation may be getting closer to easing, even if it isn’t moving as fast as investors would like. Raymond James projects that the market will start to see improvements, citing multiple indicators. The investment bank also recently named two stocks to buy for investors looking to stay ahead as markets prepare to shift.
This prediction comes from one of the firm’s leaders. According to Raymond James CIO Larry Adam, “there is a full line-up of indicators reflecting easing inflationary pressures—even a few from the stickier areas of inflation.” Adam recently elaborated on these predictions:
Inflation Expectations Fall. Three-year inflation expectations in the NY Fed Survey of Consumer Expectations report fell to a nearly two year low (2.76%). Falling inflation expectations continue to support the view that inflation is likely to slow in the coming months. pic.twitter.com/MkNxFuN9zP
— Larry Adam (@LarryAdamRJ) September 12, 2022
Adam isn’t the only expert to predict falling inflation in the coming months. InvestorPlace’s Luke Lango recently examined the same topic. Following last week’s market selloff, Lango addressed expectations for inflation to stay hot, calling the bearish thesis a “faulty assumption being obliterated by recent price action.” Lango also laid out both the supply and demand side factors of commodity prices, which are indeed falling:
“Commodity prices are collapsing. And nearly every leading inflation indicator implies that rates will collapse by more than half over the next few months. As they do, stocks will soar.”
It’s true that markets are coming off a complicated month. Per CNBC, “the consumer price index increased 0.1% in August. Excluding food and energy, the inflation gauge rose 0.6%, both higher than expected.” However, falling gas prices across the country have helped offset the overall pain felt by consumers. If both Adam and Lango are correct, markets may start to rebound within the coming months.
Let’s take a look at which names Raymond James believes are stocks to buy as a result.
Stocks to Buy for the Post-Inflation Economy
Raymond James has highlighted two stocks to buy amid easing inflation: V2X (NYSE:VVX) and Allegiant Travel (NASDAQ:ALGT). Although ALGT stock is down today, both companies are still coming off an excellent week. Here’s why Raymond James considers ALGT and VVX buys as inflation starts to cool.
V2X is a recently formed company, the result of an all-stock merger between The Vertex Company and Vectrus. Because the merger deal only reached completion in July, it hasn’t benefited from Russia’s invasion of Ukraine like other defense contractors. However, VVX stock has performed well since the merger. V2X also has applications for a wide range of services throughout the defense sector, including aerospace technology, logistics and training. According to TipRanks, its financials are promising as well:
“In Q2, the company generated revenue of $498 million, amounting to a 6% year-over-year increase and a 9% sequential uptick. Adjusted EBITDA came in at $24.7 million (5.0% margin), rising by $6.5 million quarter-over-quarter and by 100 basis points. Those figures, however, are going to get a lot bigger in the year’s latter half when the results will factor in the merger.”
VVX stock currently boasts a $52.33 average price target on TipRanks, though it has only received a few analyst ratings. Still, that represents 35% upside for investors.
Meanwhile, low-cost airline Allegiant — Raymond James’ second pick — has seen turbulence this year spurred by rising fuel costs and a general lack of confidence in the sector. Recent reports have shown promising numbers, however. For example, the company flew more passengers in July 2022 than it did in July 2019, demonstrating a 15.4% increase in revenue passenger miles. Additionally, Allegiant is venturing into the hospitality space; the company’s Sunseeker Resort Charlotte Harbor is slated to open in May 2023. Analyst Savanthi Syth broke down the bullish case for ALGT stock:
“There are encouraging signs that operational execution has improved with cancellation rates moderating from ~7% in 1Q22 and ~4% in 2Q22 to ~1% QTD (vs. the industry average of 4%/2%/1%). Moreover, the Sunseeker capex increase has already played out and we believe the share price better reflects risks around the second fleet type.”
Of Raymond James’ two latest stocks to buy, ALGT stock boasts more analyst ratings. Shares are rated as a “moderate buy” on TipRanks, with a bullish price target of $146.50. That represents upside of nearly 49%.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.