One of the brightest spots over the last year or so has been the strength of the American consumer. Thanks to rising incomes, strong job growth, and large pandemic savings balances, consumers have spent big, even in the face of higher inflationary pressures. That’s boosted the fortunes of a variety of consumer-related discretionary stocks.
However, many of the tailwinds propelling the entire consumer sector have started to flatline.
With the drumbeat of recession growing louder, the time to focus on consumer staples could be at hand. With strong cash flows, low valuations, and rising M&A/corporate actions, the sector is surprisingly well-positioned for growth during the next few quarters of mixed economic activity. For investors, there is a lot to like about toilet paper, shampoo, and dish soap.
