- Investors are searching for safe-haven assets, and retail stocks may benefit from this trend.
- Some retail stocks, like Walmart and Dollar Tree, have already shown strong performance at the start of this year.
- Other retail stocks, like Home Depot, have suffered a pullback and returned to cheaper valuation levels.
S&P 500 gained strong downside momentum in the recent trading sessions as the market reacted to hawkish comments from the Fed. Not surprisingly, investors are searching for safe-haven assets in the rising interest rate environment, and retail stocks have a good chance to benefit from this trend.
Shares of Walmart had a strong start of this year and are up by about 10% year-to-date. Analyst estimates have improved in recent months, and the company is expected to report earnings of $6.76 per share in the current fiscal year.
In the next fiscal year, Walmart is projected to report earnings of $7.28 per share, so the stock is trading at 22 forward P/E. This is not cheap for a retailer, but investors are willing to pay a premium as the company has reported strong performance in recent quarters.
Dollar Tree developed strong upside momentum in 2022, but the stock is still valued at less than 19 forward P/E.
Shares of Dollar Tree have clearly benefited from the rush into potential safe-haven assets amid high inflation and rising yields, and they have a good chance to continue the current upside trend.
Unlike Walmart and Dollar Tree, shares of Home Depot had a challenging start of this year. Currently, Home Depot is down by more than 25% year-to-date.
Analyst estimates have moved a bit lower in recent months. The company is expected to report earnings of $16.1 per share in the current year and earnings of $17.31 per share in the next year, so the stock is trading at less than 18 forward P/E.
At such levels, the stock may attract more traders who are willing to initiate positions in this market segment.
For a look at all of today’s economic events, check out our economic calendar.