Americans aren’t feeling very confident about the health of the economy at the moment. Rising gas prices coupled with threats of a government shutdown dampened consumer sentiment. Higher interest rates to tame elevated inflation also dented consumers’ confidence.
Consumers’ assessment of the future economic scenario dropped, a tell-tale sign that Americans are contemplating a recession ahead. This calls for investing in recession-proof stocks like e.l.f. Beauty ELF, American States Water AWR, and JAKKS Pacific JAKK for a steady stream of income.
Consumer Confidence Drops Yet Again
Per the Conference Board Data, the consumer confidence index fell for the second straight month in September. The index on consumer confidence dropped to 103 in September from August’s upwardly revised reading of 108.7. The index has now fallen to a four-month low.
The index that measures consumers’ assessment of the present economic scenario may have edged up to 147.1 in September from 146.7 in August, but it’s still near a four-month low.
Additionally, the index that measures future business expectations slipped to 73.7 in September from 83.3 in the prior month. By the way, any such reading below the 80 mark indicates a recession within one year.
So, what’s behind this drop in consumer confidence? Higher gas prices, primarily due to an uptick in oil prices, is currently weighing on consumers’ sentiment. The likelihood of a partial government shutdown impacting paychecks is also stoking fears among consumers.
To top it, the Federal Reserve’s intention to keep interest rates high to curb inflationary pressure is also weighing on the minds of consumers. Higher interest rates make purchasing a car or a house harder.
Don’t Shun Equities, Instead Buy Recession-Proof Stocks
With consumer confidence taking a beating, and recession concerns increasing, things may not bode well for the stock market. However, contrary to popular expectations, defensive stocks tend to do well during periods of an economic slump.
Stocks from the consumer staples and utilities sectors are defensive. This is because these stocks are cyclical, or in other words, the demand for their products and services is constant, irrespective of the market scenario. Needless to say, the demand for food, gas, electricity, and water remains intact amid market volatility.
The demand for the services provided by gaming companies also remains unaffected in any economic situation. After all, they are vice stocks, which means the nature of their business is inelastic and recession-proof.
3 Recession-Proof Stocks to Buy Now
We have, therefore, highlighted three recession-proof stocks that should make meaningful additions to your portfolio as of now. These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy).
e.l.f. Beauty operates as a cosmetic company. Currently, ELF sports a Zacks Rank #1.
The Zacks Consensus Estimate for its current-year earnings has increased 29.5% over the past 60 days. The company’s expected earnings growth for the current year is 42.8%.
American States Water, along with its subsidiaries, provides fresh water, wastewater services and electricity to its customers in the United States. AWR currently has a Zacks Rank #2.
The Zacks Consensus Estimate for its current-year earnings has increased 0.3% over the past 60 days. The company’s expected earnings growth for the current year is 29.8%.
JAKKS Pacific designs and markets a broad range of toys and consumer products. The company is also well known for producing plug-and-play game devices. JAKK, presently, has a Zacks Rank #1.
The Zacks Consensus Estimate for its current-year earnings has increased 14.2% over the past 60 days. The company’s expected earnings growth for the next quarter is 59.7%.
JAKKS Pacific, Inc. (JAKK): Free Stock Analysis Report
American States Water Company (AWR): Free Stock Analysis Report
e.l.f. Beauty (ELF): Free Stock Analysis Report
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