The Federal Reserve left its benchmark policy rate unchanged in the range of the current 5.25-5.5% on Dec 13 in its final FOMC meeting of the year. Wall Street rallied following the announcement, with all three major indexes — the Dow, the S&P 500 and the Nasdaq — recording a jump of 1.4% each.

The Dow ended at 37,090.24 points, its first record close since January 2022. Understandably, investors’ sentiment is high as they believe that the Fed may end its monetary tightening campaign anytime now as inflation continues to cool.

The Fed’s decision was highly anticipated as inflation cooled further in November. The consumer price index (CPI) increased 3.1% last month on a year-over-year basis, the Labor Department said on Dec 12. Month over month CPI increased just 0.1%.

Following the decision to keep interest rates unchanged for the third straight time this year, Fed officials maintained a dovish stance. Federal Reserve Chairman Jerome Powell said that he believes that the current policy rate is near or at its peak, and the central bank will closely monitor inflation data and try not to keep interest rates high for a longer period.

Also, the Fed projected three interest rate cuts of 25 basis points each next year, which is expected to take the policy rate to 4.6% by the end of 2024, lower than the earlier forecast of 5.1%.

Lower interest rates are certainly going to make borrowing costs cheaper. This has raised investors’ confidence as they now expect a softer landing for the economy.

Given this situation investing in consumer discretionary stocks like Accel Entertainment, Inc. ACEL, DoubleDown Interactive Co., Ltd. DDI, Hooker Furnishings Corporation HOFT,Lululemon Athletica Inc. LULU and Warner Music Group Corp. WMG would be a prudent choice.

Our Choices

We have identified five stocks from the consumer discretionary sector that are likely to benefit from the Fed’s decision to keep interest rates unchanged. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here. 

Accel Entertainment, Inc. is a distributed gaming operator primarily in the United States. ACEL’s business consists of the installation, maintenance and operation of VGTs, redemption devices, which disburse winnings and contain ATM functionality, and other amusement devices in authorized non-casino locations such as restaurants, bars, taverns, convenience stores, liquor stores, truck stops and grocery stores.