The state of economic health of the low-income consumer is significantly worsening and Cowen & Company analysts are suggesting that investors should turn their focus on the shares of the leading off-price retailers such as Wal-Mart Stores Inc (NYSE:WMT), McDonald’s Corporation (NYSE:MCD), And TJX Companies Inc (NYSE:TJX) as the number of low-income consumers continues to rise.
Cowen stated that the personal savings rate has continued to deteriorate and as of today, it’s growing at 3.5%, which is far below historical economic trends. Since 2012, the nonfarm payroll has been growing at the lowest rate of 1.4% while health care expenses grew at 7% compound growth rate annually which becomes the fastest growing sector in the personal consumption class.
The shift in the consumer policies such as the amendments made to the North American Free Trade Agreement (NAFTA) and eradication of Deferred Action for Childhood Arrivals (DACA) have also contributed to the situation based on the market analysts.
Analysts from Cowen recommend that investors should consider the stocks that have a direct benefit from consumers and that they can compete against companies such as Amazon. According to the latest reports from Moody’s Investors Service, Amazon is the weakest company among the US key players. There are a number of myths about its real size and masked performance of Amazon compared to its competitors like Costco Wholesale Corp., and Wal-Mart Stores.
Charlie O’Shea, the Moody’s vice president, and lead retail analyst stated that the perception that Amazon is likely to overtake the grocery business if it acquires the Whole Foods is also another myth.
Cowen further recommends other companies such as the Adidas Ag, Pepsi Co Inc., Yum Brands Inc, and Taco Bell Chain which has tried to differentiate itself from its rivals in terms of marketing, value chain, and innovation. The analysts are also suggesting that investors should look for stocks that have a high-end interest such as the LVMH Moët Hennessy Louis Vuitton SE and Tiffany & Co.