As the consumer spending goes, so goes the U.S. economy and the stock market. In fact, it isn’t only personal spending choices that have propped up the difficult-to-predict post pandemic economy. The government continues to spend more than it takes in as well. Unfortunately, that seems to be the nature of the American economy at this point. Things are good when both the government and the people spend with abandon. That’s what the most recent GDP numbers show.
Consumer spending is a strong factor that has allowed the economy to remain strong despite continued calls for a downturn. As a result investors should consider these firms which are doing very well as a result.
Visa (V)
Visa (NYSE:V) continues to perform very well as the boom in post-pandemic travel has yet to subside. Metric after metric points to the same conclusion, V stock is in a strong position. Consumer appetite for international travel and credit card purchases while abroad remain very strong.
That was the gist of Visas Q3 results which were released on Oct. 24. Despite the strong performance, V stock moved downward anyway. The movement was explicable by the fact that the market remains forward looking in nature. A few days later, GDP numbers were released that showed unexpectedly strong growth throughout the U.S. economy. Shares have trended upward since.
My guess is that now bearish pundits will be looking to find reasons to characterize Q3 as unsustainable. I’d generally agree except that I think the appetite for cross-border travel won’t subside. I think this is a case of shifting income distribution propping up new spending trends. The middle may be getting poorer but that might not negatively affect travel in this new economy.
Walmart (WMT)
Walmart (NYSE:WMT) won’t release earnings for another week but the overall direction of the economy suggests the stock should continue to do very well. Q2 earnings were very strong for Walmart. That news served to ease broader fears because Walmart is a reasonable proxy for the U.S. economy at large.
So, Walmart was already headed in the right direction entering Q3. Many firms have already released third quarter earnings and things are generally looking good. Q3 GDP is of course, also suggestive that Walmart will fare well next week.
Beyond that, investors already know that company CEO Doug McMillon is upbeat about Walmart’s direction after he said as much in mid September. I expect that Walmart is going to be performing very well given that management is generally cautious at Walmart. The fact that the CEO deviated from that pattern early in Q3 is a strong positive signal for investors heading into earnings.
LVMH Moet Hennessy Louis Vuitton SE (LVMHF)
LVMH Moet Hennessy Louis Vuitton SE (OTCMKTS:LVMHF) is an excellent choice for investors looking to capitalize on consumer spending growth. The stock’s performance is driven by its various brands which are separated into houses such as wines, watches, fashion and jewelry.
Those so-called houses are performing well collectively leading to 14% overall revenue growth through the first 9 months of 2023.
LVMH Moet Hennessy Louis Vuitton SE’s management didn’t provide much color in regard to its assertion that it expects strong growth moving forward. Rather, the company believes it can continue to enhance the desirability of its brands into the future.
I can’t find a good reason to disagree with that notion. It’s clear that there’s a global appetite for luxury products that isn’t slowing. If the rich are indeed getting richer, that bodes very well for LVMHF stock.
Beyond that, investors should also take note that its shares have strong upside above their current price.
Hermes International (HESAY)
Hermes International (OTCMKTS:HESAY) is a lot like LVMH Moet Hennessy Louis Vuitton SE. Very similar target demographic, both sell luxury products and both are doing well at the moment. It’s worth buying due to how strong its high-income consumer base continues to be. For investors considering Hermes or LVMH, go with LVMH because Hermes has less upside. But, I still think both remain worth buying if you have the funds.
Revenues grew by 17% through the first 9 months of 2023 and by 16% in Q3. One of few issues with Hermes is that it suffers due to the strength of the Euro overall. Global sales must be repatriated to its France headquarters. The strength of the Euro makes those sales increases less pronounced due to the exchange rate.
American Express (AXP)
American Express (NYSE:AXP) continues to surprise positively. It’s been a few weeks since the credit card firm that caters to higher income consumers released earnings. Nevertheless, it’s worth examining its performance and investing in the stock.
It’s probably not surprising that the company did so well in light of later-released GDP figures. However, the company really did perform exceptionally well. EPS reached $3.30 but Wall Street had been expecting $2.95 per share. Revenues increased by 13% and American Express reported its 6th straight quarter of record revenue generation.
Those results serve as a strong testament to the idea that the American consumer remains particularly resilient. One of the strongest reasons to continue to believe in AXP and its shares is that delinquency rates remain below pre-pandemic levels. If its customers are hurting, it isn’t reflected in American Express’ financial statements at this point. That’s a good enough reason to continue to believe in AXP at this point.
McDonald’s (MCD)
McDonald’s (NYSE:MCD) is pretty much always worth a look for investors. Whether it’s in relation to consumer spending, dividends, or blue-chip firms, McDonald’s often finds its way onto buy lists.
During weak economies McDonald’s does well as diners seek cheaper meals. Conversely, McDonald’s seems to fare just as well in all other economic conditions. That hasn’t changed as McDonald’s continues to deliver. EPS figures reached $3.19 during the most recent quarter which was above the $3 Wall Street had been expecting.
Sales growth globally slightly outpaced domestic sales growth, reaching 8.8%. The company’s Asia stores performed even better, growing more than 10% during the period.
McDonlad’s did experience a decrease in foot traffic among low-income customers but it didn’t seem to reflect negatively in its results. Overall, MCD stock is going to continue to be a winner. Its restaurants are ubiquitous globally and the company continues to find ways to outperform over the long run.
Procter & Gamble (PG)
Procter & Gamble (NYSE:PG) is making bank as consumer resilience remains unexpectedly strong. That’s the message the company sent when it released earnings a few weeks ago.
Sales were up 6% to $21.9 billion and earnings an even higher 17%. Consumers continue to spend on the staple goods that Procter & Gamble makes. That’s somewhat surprising given that P&G’s products are priced higher than their off-brand competition and analysts have been worried that consumers will trade down. However, not only have consumers not traded down, they continue to buy P&G products even as the company continues to raise prices again and again.
The company is expected to return to a volume strategy in the future but I suspect it will maintain prices at current levels in doing so. Consumers continue to signal that they’re willing to pay ever increasing prices for the brands they know. P&G might be entering a new paradigm of high volume sales at elevated prices in the near future. The consumer seems to be willing to allow it so invest in PG stock to take advantage.
On the date of publication, Alex Sirois did not have (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.