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The $1.9 trillion America Rescue Plan includes a benefit for families with children.
Getty Images/Michael Loccisano
On Thursday, families with children should begin getting monthly checks from the federal government as $150 billion in enhanced child tax credits begins to trickle into bank accounts. The cash is expected to reach 39 million homes in the United States, covering 88 percent of children and 80% of bank accounts. Depending on income eligibility limits, families with children aged 6 to 17 may get up to $3,000 per child each year. Parents of children under the age of six may be eligible for up to $3,600 per child.
The funds are part of President Jor Biden’s $1.9 trillion America Rescue Plan, which was signed into law in March. The measure only extends the enhanced credits for a year, but they are seen as a first step toward giving families with a universal basic income. This is a top goal for Democrats in Congress and the Biden administration, which will undoubtedly strive to make the credits permanent. As a result, discretionary expenditure may increase, especially among lower-income households. According to Cowen analysts, the credits could result in an additional $37 billion in spending over the following year, including an additional $11 billion on groceries, $6.5 billion at restaurants, and more than $10 billion across industries like clothes, alcohol, and cannabis.
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Given that the economy has been growing, Wall Street may have already factored in the increase in expenditure.
S&P 500 Index
This year, it has increased by 16.3 percent. However, according to Cowen’s analysts, the spending isn’t entirely represented in consensus earnings expectations, so profits could still be greater than expected. Some of the biggest grocery winners might be
Walmart
(WMT) is a stock that trades on the New York Stock Exchange.
Target
& (TGT)
Holdings of Grocery Stores
According to Cowen analyst Oliver Chen, (GO) is a good investment.
Only Target has outperformed the others this year, with a gain of 42.6 percent, while
Walmart
Grocery Outlet is down 11.9 percent and is down 2.5 percent. Following a rise in 2020, grocery sales are projected to fall this year as people dine out more and prepare less. However, Chen forecasts a 3.2 percent annual growth rate for groceries over the next two years, significantly above the 2.7 percent five-year average from 2014 to 2019. He claims that Walmart’s grocery business is stronger now than it was before the epidemic, thanks to investments in online and omnichannel sales. Target’s grocery sales are also improving, and Go’s “flexible and value-driven approach” should benefit from increased spending by lower-income households, he argues, noting that the average Target consumer earns less than $75,000 per year. Among the fast-food restaurants,
Wingstop
According to Cowen analyst Andrew Charles, (WING) should enjoy improvements, partially because it has the greatest percentage of active monthly customers who will receive tax credits.
Wingstop consumers should receive the checks in greater numbers than any other fast-food company.
Darden Restaurants is a chain of restaurants owned by Darden.
According to Charles, (DRI) also performs well on this metric, with 52 percent of Yard House customers and 48 percent of Cheddar’s Scratch Kitchen customers receiving tax credits. Clothing manufacturers and merchants are likely to benefit. Among the clothing firms whose earnings could exceed Wall Street’s expectations are:
Nike
(NKE),
Foot Locker is a retailer that sells shoes.
(FL), as well as
Dick’s Sporting Goods is a store that sells sporting goods.
(DKS), according to John Kernan of Cowen.
Off-price businesses like Sears, for example, could benefit.
TJX Companies is a brand of TJX Companies.
(TJX),
Ross Stores is a chain of department stores in the United
and (ROST)
Burlington Stores is a retailer in Burlington, Vermont.
(BURL). Other consumer industries, such as alcohol and cannabis, could benefit.
Constellation Brands is a conglomerate that owns a number
(STZ) provides exposure to both and may profit from the fact that beer sales are skewed toward lower-income households. Constellation also has a stake in Canopy Growth, a Canadian cannabis producer, which gives it access to the market. According to Cowen analyst Vivien Azer, Constellation “is best positioned to capture incremental sales because the firm has been a steady outperformer in beer both before and during Covid, and we expect this trajectory to continue.”
She also enjoys
Green Thumb Industries is a company that specializes in environmentally friendly products
(GTI), a Canadian firm, wants pure-play exposure to cannabis. Investors could buy an exchange-traded fund that covers comparable themes instead of buying individual stocks. The
ETF SPDR S&P Retail SPDR S&P Retail ETF SPDR S&P Retail E
This year, (XRT) has outperformed the market, rising 53 percent. The following are some other ETFs to consider:
Consumer Discretionary Invesco S&P SmallCap
(PSCD) and (PSCD) and (PSCD) and (PSCD)
Momentum in Invesco DWA Consumer Cyclicals
(PEZ). While the first two ETFs are outperforming the market, they may continue to do so if spending goes up in the second half of the year as customers with children spend more. Daren Fonda can be reached at daren.fonda@barrons.com./n
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