Many on the Street have incorrectly believed the Federal Reserve was extremely hawkish and tremendously dedicated to its 2% inflation target. A huge number of investors also inaccurately thought that inflation would be extremely “sticky” and impossible to bring down without causing a recession. But now, even with “core” inflation having come in at 4% last month, most believe the Fed will not hike rates again in 2023 or 2024 and will begin cutting rates at some point in the first half of 2024.

Moreover, inflation is clearly on a downward path, even though the economy is still growing robustly. And because many investors were sure a recession would occur, a large number of stocks are changing hands at extremely low valuations. The retail sector, in particular, has many very cheap stocks because most on the Street were incorrectly betting that extremely high rates and a recession would greatly affect consumers’ purchasing power. Here are three names within the retail sector that are especially cheap stocks to buy.

Ford Motor (F)

British bank Barclays (NYSE:BCS) recently upgraded Ford (NYSE:F) to Overweight from Equal Weight. One reason for the upgrade the bank cited was the very low valuation of F stock, significantly below its historical average.

Indeed, even after F stock rallied recently, the shares have a forward price-earnings ratio of 5.8, versus the name’s forward P/E ratios of 9.1 and 7.75 in June 2023 and March 2023, respectively. As a result, F is certainly in the “cheap stocks to buy” category.

Since Ford, like all advanced automakers, will be able to greatly boost its profits by selling software subscriptions to its customers, that valuation does represent a great buying opportunity for medium-term and long-term investors.

Moreover, with interest rates poised to decline meaningfully, buying new cars will become much more affordable for consumers. Consequently, the demand for Ford’s vehicles is likely to jump in 2024, greatly boosting its top and bottom lines.

Best Buy (BBY)

Like Ford, Best Buy’s (NYSE:BBY) forward price-earnings ratio has dropped a great deal in recent months. In fact, its forward P/E ratio is currently 10.3, down from 13.5 in July and 13.3 in January.

Meanwhile, with inflation falling, interest rates likely following suit and unemployment remaining quite low, consumers will be able to afford much more of Best Buy’s expensive tech offerings going forward.

Further, over the medium and long term, the demand for devices with built-in AI capabilities will likely be very strong, providing the company and BBY stock with major, positive catalysts.

Also noteworthy is that billionaire Ray Dalio raised his stake in BBY stock to 145,000 shares from 116,000 shares last quarter.

Dick’s Sporting Goods (DKS)

The forward price-earnings ratio of Dick’s Sporting Goods (NYSE:DKS) is just 9.2, down substantially from nearly 11 in April.

But Dick’s is reducing the number of temporary workers it’s hiring for the holiday shopping season by just 4.4% this year to 8,600, suggesting the decline of the stock’s forward P/E ratio is way overdone.

Moreover, DKS should get a boost not only from the decline of interest rates and inflation but also from the current weakening of “revenge travel” trends.

That’s because, with Americans spending less on travel, they’ll have more money available to spend at Dick’s. And they’ll have much more time to use sporting goods, making them more likely to buy Dick’s products.

On the date of publication, Larry Ramer 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.