It’s plain to see that there’s plenty of optimism for Q4 2024 among retail investors and their institutional counterparts alike. The prospect of US Federal Reserve interest rate cuts has spurred more optimism throughout Wall Street, with recent forecasts suggesting that rates may fall as low as 4.75% by the end of 2024.  This, coupled with the historical performance of stocks during the holiday season, is helping to shape a positive narrative for the end-of-year prospects of retail stocks. 

Since 1945, the S&P 500 has grown 77% of the time throughout the fourth quarter of the year, gaining an average of 3.8%. This makes Q4 generally the strongest quarter of the year, buoyed by increased consumer spending.

Although there’s certainly a case to be made that Fed interest rate cuts have already long been factored into the S&P 500, there will be plenty of opportunities for investors on Wall Street moving into October and beyond. However, there will still be plenty of losers throughout the markets, and it could be worth steering clear of these three particularly volatile retail stocks: 

Macy’s Inc (M)

It’s been a challenging post-pandemic recovery for Macy’s Inc (NYSE:M). The department store firm has struggled to build on the momentum gained in the past decade and now sits more than 75% adrift from its 2015 highs. 

To make matters worse, in February, Macy’s announced the closure of 150 stores around the United States, citing shifts in consumer behavior. 

Investors had found some optimism in the news that a $6.9 billion buyout from investment firms Arkhouse Management and Brigade Capital Management could help to change the retailer’s fortunes this year, but Macy’s ultimately ended its discussions with the two parties citing a ‘lack of compelling value’ as well as ‘uncertainty of financing.’

As a result of the scuppered talks, Macy’s stock tumbled 15%, highlighting its volatility with more uncertainty ahead for the struggling retailer. 

The downsizing for Macy’s department stores reflects the challenges of brick-and-mortar versus online shopping experience, where a growing consumer inclination for online shopping is causing once-thriving retailers to rethink how to manage overheads while delivering competitive value. 

Lowe’s Companies Inc (LOW)

Over the past 10 years, home improvement specialists, Lowe’s Companies Inc (NYSE:LOW), has offered exceptionally consistent value for investors. However, indications are mounting that all may not be well with the historically reliable stock. 

July has seen an uptick in activity among Lowe’s insiders offloading $1.5 million worth of stock. Although the actions of company directors aren’t a clear signal of company performance, surges in insider sell-offs can point to choppy waters ahead for stocks. 

One factor that could be impacting the stock’s performance is a slowdown in DIY spending among consumers. This could be a logical occurrence. The post-pandemic landscape was full of lockdowns and a surplus of time and government stimulus that saw a surge in home improvement activity in recent years. 

Although Lowe’s beat its Q1 2024 earnings estimates, profits fell more than 20% compared to the first quarter of 2023, with $1.76 billion in net income falling far below the $2.26 billion gained at the beginning of last year. 

With this in mind, the stock may be facing a long-overdue market correction as the DIY spending slowdown hits home improvement stocks. You can see why this made our list of the top retail stocks.

Costco Wholesale Corporation (COST)

It’s always challenging to predict when a soaring stock will run out of steam and after recently touching a fresh all-time high value, Costco Wholesale Corporation (NYSE:COST) appears unstoppable. Still, signs are beginning to suggest that the wholesale giant is finally running out of steam.

Costco recorded growth of more than 50% over the first half of 2024 but dipped in recent days following a long-awaited membership fee hike. 

The increase in membership fees, the first of its kind since 2017, saw Costco’s membership prices rise to $65 a year for individuals, up from $60, and $130 for executive memberships, up from $120. 

Although the fee increases were nuanced, Costco’s market value dipped on the news as investors opted to take their profits off the back of many months and years of anticipation. 

Now, the stock enters uncharted territory as investors weigh up their next moves when it comes to holding the stock. Although Costco has long been an impressive force on Wall Street, we could see Q4 2024 become more volatile for the stock due to the implications of investors revising their long-term holding ambitions. Do yourself a favor and pick up all of these retail stocks.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.

On the date of publication, Dmytro Spilka 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.