The stars are aligning for consumers, businesses and investors alike — odds still look to be in favour of a majority Coalition victory at this weekend’s election, low interest rates and a lower Australian dollar. This Fool thinks it’s time to start snapping up high-yielding stocks that will benefit from a rise in confidence before it’s too late.
Firstly, investors should know that an upwards tick in confidence might not eventuate. According to Goldman Sachs, the chances of improving confidence after an election is “not supported by the economic data” that so many investors rely on. “It is unlikely business conditions will recover materially without a broad-based recovery in consumer spending, and slowing household income growth suggests a cautious consumer will persist”.
However leaders in the construction industry have said a victory at this weekend’s election will help confidence. GPT group MD Michael Cameron was quoted in The Financial Review as saying that “I am hoping that the election result produces a positive stimulus to spend money”. Macquarie group CEO Nicholas Moore was more bullish and said that the election would be a chance for people to “reset their confidence levels”.
The consensus among leaders in the property sector is that we won’t realise the benefits of low-interest rates and improving confidence until the ‘back end’ of 2014. In the meantime, if stock prices in companies such as Westfield Group (ASX: WDC) or REITs drop, this investor will be making room in his portfolio.
Another way to take advantage of a boom in confidence is through retail stocks. Companies like Myer (ASX: MYR), Harvey Norman (ASX: HVN), as well as smaller plays like Nick Scali (ASX: NCK), could provide investors an opportunity to cash in whilst they’re cheap.
As any good investor knows, the best time to buy stocks is when they’re cheap. At current prices many of our retailers are good value because they’ve experienced a number of tough years. It wouldn’t be safe to expect them to turnaround profits in a month or even a year from now, but buying them when they’re cheap allows you to rest easy knowing upwards movements are justified and sustainable.
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Motley Fool contributor Owen Raszkiewicz owns shares in Myer.
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