Broker Check

Weekly Market Update March 8, 2024

March 10, 2024

Fed Funds 5.25% - 5.5%, US Ten Year 4.078%, Oil $77.84

We endured more “Fed Speak” this week, courtesy of the Federal Reserve’s March meeting. Markets get twitchy as the two-day FOMC meetings commence, react keenly upon the release of the data, then settle down as participants digest and discount the numbers. It is a pattern that has become monotonous over the past year, notwithstanding the never-ending speculation of when the FOMC will cut the Fed funds rates. Let the short-term traders have their fun and anxiety, while investors focus on investments that will do well over time.

While the buzz surrounding Artificial Intelligence and cyber-security has put technology in the center, other sectors offer opportunities. Consumer spending accounts for 70% of total GDP, but Investing in Retail can be a challenge, as it is highly competitive and very much subject to household income. Two companies in particular that are worthy of interest are Costco and TJX Companies.

Costco (COST - $728) is the largest membership retail “club,” and is well-established in the United States, Canada, Mexico, the United Kingdom, and Japan, and expanding further into Europe and Asia. It is my preferred mass retailer. While it pays a modest regular quarterly dividend of $1 or so, they are distinct in that about every three years it disburses a large special dividend. These were $5 in 2015, $7 in 2017, $10 in 2020, and $15 in 2023. The company’s earnings growth certainly justifies these payouts:    

TJX Companies (TJX - $96) stand out within the specialty retail space. This leader in off-price retailing includes Home Goods, Marshalls, and TJ Max, and it also has an international presence. It sells clothing, home decor items, lighting, gourmet foods, rugs, jewelry, and accessories. (It is also the “go to” apparel store for the female members in my family when they go bargain hunting). Its five-year dividend growth rate is 11.26% per annum. Like Costco, its price performance has also been particularly good:

With the economy growing and wages increasing, well-managed retailers should expand their dominance within the sector.

 Wishing You a Great Week,