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With Australia’s retail spending down in six of the last seven quarters, the pressure on this sector is undeniable. In fact, Deloitte Access Economics’ Retail Forecasts have identified that over the past 18 months, the retail industry has been in a recession, raising concerns about whether these figures could be a precursor to a broader economic downturn. In these uncertain times, one pressing question emerges: Are there stocks that can weather the storm?
Enter the Consumer Staples sector. While it might not offer the thrills of rapid growth or high volatility, its resilience across different market conditions makes it a compelling choice in a weaker economy. As interest rates rise, consumers often tighten their belts on non-essential items, but essentials like groceries, household products, and personal care items remain a priority.
Take Coles and Woolworths, for instance. These supermarket giants recently reported impressive earnings, with Coles generating $1.1 billion and Woolworths pulling in $1.7 billion. These figures underscore strong consumer demand and highlight the companies’ adept management, even in challenging times.
But beyond these household names, there are other Consumer Staples stocks that deserve attention:
GrainCorp (ASX:GNC): A leader in agribusiness, GrainCorp plays a crucial role in the grain and oilseed markets, both essential food products. As global food demand rises and supply chains face pressure, GrainCorp is well-positioned to benefit. Turning to the share price, since hitting a low in October 2023, the stock has surged over 30 per cent, approaching the $9 resistance level. A break above this point could pave the way for a retest of its all-time high at $10.86.
Inghams Group (ASX:ING): One of Australia’s largest poultry producers, Inghams Group is a vital link in the food supply chain. The company recently reported a substantial 7.2 per cent increase in revenue growth. However, concerns over a decline in poultry volume growth triggered a 20 per cent drop in the share price. Currently, the stock is nearing the $3 historical support level, which could attract investors, although a dip below $3 would be a bearish sign.
Elders (ASX:ELD): Elders provide essential services and advice to farmers and agribusinesses, positioning themselves to capitalise on growing food demand driven by population growth. With its share price climbing over 60 per cent since the low in October 2023, Elders is on a strong upward trajectory, and a breakout above $10 could ignite a rally toward $15, offering significant upside potential.
In times of economic uncertainty, the Consumer Staples sector stands out as a smart choice for investors seeking stability and growth potential.
What are the best and worst-performing sectors this week?
The best performing sectors include Financials and Real Estate, both up over one per cent, followed by Materials, slightly down 0.2 per cent. The worst performing sectors include Information Technology and Consumer Discretionary, down over one per cent, followed by Communication Services, down over half a per cent.
The best performing stocks in the ASX top 100 include IDP Education, up over nine per cent, followed by Worley Limited, up over eight per cent, and Resmed, up over six per cent. The worst-performing stocks include NIB Holdings, down over 13 per cent, followed by Mineral Resources, down over nine per cent and Whitehaven Coal down over six per cent.
What’s next for the Australian stock market?
With the All Ordinaries Index slightly up this week, the question now is whether this marks the final push from the buyers in the short term. In fact, signs are already emerging that the market may be preparing for a wave of selling in the coming weeks.
While buyers have shown strength over the past three weeks, a concerning trend has developed: declining trading volume. Since mid-August, participation has steadily dropped, with this week’s volume at just half of last week’s. This decrease in activity may signal waning confidence, indicating that the market might not be ready for a move to a new all-time high just yet.
Adding to this cautious outlook is the historical performance of the All Ords in September. Over the past 40 years, the index has typically declined by over half a per cent during this month, reinforcing the idea that the market could face headwinds.
However, there’s some positive news as well. The materials sector has traded higher for the second week in a row, a first since May this year and the Financial sector has also shown strong performance this week, leading the market.
I’ve often emphasised that when Financials and Materials rise together, it’s unlikely that the market will experience a significant decline. The alignment of these key sectors suggests that any September pullback might be brief both in terms of depth and duration. In fact, with these sectors gaining momentum, there’s even a chance that September could surprise with a positive turn, potentially driving the All Ords to new all-time highs.
Regardless of the market’s broader direction, it’s essential to stay focused on individual stocks. Identifying and capitalising on stocks that outperform their peers or the broader market can make a significant difference to your return.
For now, good luck and good trading.
Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online at www.wealthwithin.com.au.
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