Here's What to Do Now in Case the Fed Waits Until September

Last Friday’s massive jobs numbers, while great economic news, may not be the news that some investors hoping for a July rate cut were looking for. Most on Wall Street were looking for about 165,000 jobs to be added, but the blow-out print of 224,000 was way off the radar for most firms, and it seemed to indicate that the economy is still much stronger than many anticipated. The weak May jobs number turned out to be a red herring of sorts, when the strong June figures were reported. The unemployment rate actually edged slightly higher to 3.7%, but still remains near 50-year lows.

The question now for investors is what will happen if the Federal Reserve decides to hold off on a rate cut until the September meeting. Chair Jay Powell will be speaking later this week, and it’s a good bet he will say that both he and the Federal Reserve governors are “looking closely” at the incoming data.

With interest rates still at close to generational lows, there doesn’t seem to be any immediate need to lower rates now. However, President Trump continues to jawbone Powell, citing the policies of foreign central banks as a major reason we should cut rates.

We screened the Merrill Lynch High Quality and Dividend Yield research database looking for stocks investors may want to consider moving to now that actually should do well regardless of the rate decision at the end of July. We found four great picks and all are rated Buy.

Darden Restaurants

Regardless of the interest rate decision, people have to eat, and this company has consistently delivered the goods. Darden Restaurants Inc. (NYSE: DRI) is a casual-dining restaurant portfolio company. Its approximately 1,700 restaurants are 100% company-owned and include two large brands: 850 Olive Garden restaurants and 500 LongHorn Steakhouse units. The company’s smaller brands include Cheddar’s Scratch Kitchen, Capital Grille, Bahama Breeze, Seasons 52, Eddie V’s and Yard House.

Despite some so-so fiscal fourth-quarter results, the analysts remain positive and noted this in a recent report:

We remain Buy rated and believe Darden is well positioned for an industry shift towards scale going forward, which we think show up in its capabilities around data analytics and customer insights. The company’s ability to protect margins while driving strong top-line is a sharp contrast to casual dining peers who are struggling to get flow-through in a tough cost backdrop.

Darden shareholders receive a 2.82% dividend. The Merrill price target for the stock is $130, and the Wall Street consensus target is $126.88. The shares ended trading on Monday at $124.98 apiece.

Procter & Gamble

The company offers a very solid dividend and safety, and the stock is on the Merrill US 1 list. Procter & Gamble Co. (NYSE: PG) is one of the world’s largest consumer products companies, and it operates in five segments: Beauty, Grooming, Health Care, Fabric & Home Care, and Baby & Family Care. Its many brands include Pampers, Tide, Bounty, Charmin, Gillette, Oral B, Crest, Olay, Pantene, Head & Shoulders, Ariel, Gain, Always, Tampax, Downy and Dawn.

The company actually is innovative in its product development process and uses that to help ensure future growth and cash flow. This should provide investors years of steady growth and dividends.

Shareholders receive a 2.83% dividend. The Merrill team has a $119 price target, while the posted consensus price objective was last seen at $107.71. The stock closed Monday at $114.05 a share.

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