5 Discretionary Stocks to Boost Your Portfolio on Rising Rate Cut Hopes

U.S. stocks have been on a rally for the past few days. A batch of impressive economic data has raised optimism among investors who have set aside tariff concerns and are looking forward to the Federal Reserve’s next move with interest rate cuts.

Expectations of a rate cut by the Fed in September rose on Tuesday after fresh data showed that inflation increased at a slower pace than expected. Given the optimism surrounding rate cuts, investing in consumer discretionary stocks would be a wise decision.

Five such stocks are: The Walt Disney Company DIS, Carnival Corporation & plc CCL, Hasbro, Inc. HAS, Netflix, Inc. NFLX and Ralph Lauren Corporation RL. These stocks currently have a Zacks Rank #1 (Strong Buy) or #2 (Buy) each and assure good returns.

Inflation Report Raises Rate Cut Hopes

Investors were expecting inflation to accelerate in July as a result of President Donald Trump’s hefty tariffs. Inflation did rise, but at a pace slower than expected. The Commerce Department’s Bureau of Labor Statistics said the consumer price index increased 0.2% month over month in July, which came in lower than the consensus estimate of a rise of 0.3%. CPI rose 0.3% in May.

Year over year, CPI rose 2.7% in July, which also came in lower than the consensus estimate of a rise of 2.8%. Core CPI, which excludes the volatile food and energy prices, rose 0.3% in July, which came in line with the consensus estimate. Year over year, core CPI rose 3.1%, marginally higher than analysts’ expectations of an increase of 3%.

Investors were worried that a spike in prices of goods following Trump’s tariffs would raise inflation substantially, which could weigh on the economy. This had also been a concern for the Federal Reserve, which adopted a cautious stance and left the interest rates unchanged in its July policy meeting.

However, despite a rise in the cost of goods, inflation increased at a slower pace than expected, sending stocks on a rally. The S&P 500 and the Nasdaq ended Wednesday on a record all-time closing high for the second straight day.

Expectations are now that the Federal Reserve will finally go ahead with a rate cut in September. Market participants are now pricing in a 95.9% chance of a 25-basis point rate cut in September, according to the CME’s FedWatch Tool. This was 85% before the release of the CPI report. Lower borrowing costs bode well for the broader economy.

5 Discretionary Stocks With Upside

The Walt Disney Company

The Walt Disney Company has assets that span movies, television shows and theme parks. Revenues were $91.4 billion in fiscal 2024. DIS’ fourth-quarter fiscal 2024 results reflect growth in Disney+ subscribers and Media and Entertainment Distribution businesses. Domestic theme park and resort businesses gained due to guest spending growth attributable to increases in per capita guest spending at theme parks and cruise lines.

The Walt Disney Company’s expected earnings growth rate for the current year is 17.7%. The Zacks Consensus Estimate for current-year earnings improved 1.4% over the last 60 days. DIS presently has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Carnival Corporation & plc

Carnival Corporation & plc operates as a cruise and vacation company. As a single economic entity, CCL forms the largest cruise operator in the world. Carnival Corporation & plcis the world’s leading leisure travel firm and carries nearly half of the global cruise guests.

Carnival Corporation’s expected earnings growth rate for the current year is 40.9%. The Zacks Consensus Estimate for current-year earnings improved 7% over the last 60 days. Carnival Corporation currently carries a Zacks Rank #1.

Hasbro, Inc.

Hasbro, Inc. is engaged in the design, manufacture and marketing of games and toys. HAS offers traditional, high-tech and digital toys, games and licensed products under various well-known brands.

Hasbro’sexpected earnings growth rate for the current year is 19.5%. The Zacks Consensus Estimate for current-year earnings has improved 13.5% over the past 60 days. HAS presently sports a Zacks Rank #1.

Netflix, Inc.

Netflix, Inc. is considered a pioneer in the streaming space. NFLX has been spending aggressively on building its portfolio of original shows. This is helping Netflix sustain its leading position despite the launch of new services like Disney+ and Apple TV+, as well as existing services like Amazon Prime Video.

Netflix’s expected earnings growth rate for the current year is 31.4%. The Zacks Consensus Estimate for the current-year earnings has improved 2.9% over the past 60 days. Netflix currently sports a Zacks Rank #1.

Ralph Lauren Corporation

Ralph Lauren Corporation is a major designer, marketer and distributor of premium lifestyle products in North America, Europe, Asia and internationally. RL offers products in apparel, footwear, accessories, home furnishings, and other licensed product categories.

Ralph Lauren’s expected earnings growth rate for the current year is 19.8%. The Zacks Consensus Estimate for the current-year earnings has improved 8% over the past 60 days. RL currently carries a Zacks Rank #1.

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This article originally published on Zacks Investment Research (zacks.com).

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