Unusual Santa Claus Rally This Time? These 3 Stocks Don't Care

December, traditionally, has been a good time for Wall Street. The Dow Jones Market Data noted that the Dow’s record in December has been commendable. The blue-chip index has given an average return of 1.4% in the said period. Similarly, the broader S&P 500 and the tech-laden Nasdaq have also scaled upward in December by gaining on average 1.4% and 1.7%, individually.

What’s more, historically, U.S. stocks have moved northward in the last five trading sessions of December as well as the beginning two trading days of January, better known as the Santa Claus Rally. According to the Stock Trader’s Almanac, the S&P 500, in particular, has advanced an average 1.3% during the said period since 1969. Meanwhile, CFRA Research added that stocks actually have moved upward 75% of the times during the Santa Claus Rally since 1945.

However, this December, things aren’t looking so encouraging. In the month-to-date period, the S&P 500 and the Nasdaq have just held onto the gains, while the Dow remains in the negative territory. This is because the possibility of the Federal Reserve being more aggressive in its monetary policy stance coupled with China’s economic crisis continues to weigh on investors’ sentiment, which could easily extend till the year-end.

Lately, an upbeat service sector report of the economy along with an increase in wages fueled worries that the Fed may be compelled to remain hawkish to tame inflation, consequently dragging the economy into a recession. The Institute of Supply Management added that the barometer of the service sector climbed to 56.5% in November, indicating exceptional growth. On top of that, wages increased more than 5% in November from a year ago. Needless to say, that wage growth and a healthy economy could easily lead to consumers spending more and increasing the prices of indispensable goods and services.

Now, inflationary pressure may not be good for the overall economy but as long as consumers are willing to spend, consumer discretionary stocks stand to gain. In reality, households have been spending on essential commodities as well as big-ticket items despite higher prices. In October, consumer outlays increased 0.8% on a seasonally adjusted basis from the prior month, per the Commerce Department. Lest we forget, sales at U.S. retailers did increase in October after consumers stepped up their spending.

Thus, courtesy of an uptick in consumer spending, consumer discretionary stocks like Crocs (CROX), Hilton Grand Vacations (HGV) and Wyndham Hotels & Resorts (WH) are surely poised to gain traction this month even if there are doubts about a broader year-end stock market rally. After all, outlays do play a significant role in determining their revenues. At present, these stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Crocs is one of the leading footwear brands focusing on comfort and style. CROX has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 2.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 23.7%. CROX’s projected earnings growth rate for the next year is 4.5%.

Hilton Grand Vacations, a division of Hilton Worldwide, is engaged in the hospitality business. HGV sports a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 19.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 60.9%. HGV’s projected earnings growth rate for the next year is 24.6%.

Wyndham Hotels & Resorts provides a hotel and resort chain. WH carries a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 6.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 22.2%. WH’s projected earnings growth rate for the next year is 3.1%.


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