With interest rates most likely at their peak, and very possibly coming down later in 2024, history tells us this could be a really big year for S&P/ASX 200 Index (ASX: XJO) shares.
Lower interest rates tend to benefit most stocks, though often with a lag. As you'd expect, some stocks tend to get more tailwinds from falling rates than others.
Among those are ASX 200 shares involved in the consumer discretionary sector. That's especially true because we're likely looking at lower rates going hand in hand with lower inflation in Australia.
And that means more money left in consumers' pockets to spend on those services and goods they don't really need but do really want.
Below we look at three ASX 200 shares in that sector that I believe could outperform in a falling rate environment.
Electronics and household goods stocks
First up we have electronics and home appliance retailer, JB Hi-Fi Ltd (ASX: JBH).
The ASX 200 retail share saw its comparable sales growth for the September quarter dip across Australia and New Zealand, with its Good Guys segment also reporting lower sales.
Yet the JB Hi-Fi share price began marching higher in late October.
Partly spurred by increasing investor optimism of pending rate cuts from the RBA and the US Federal Reserve, the ASX 200 share leapt 36% from 26 October through to 15 January.
Amid headwinds that include the dawning reality that, while interest rates may have peaked cuts are still likely some months away, the JB Hi-Fi share price is down 7% since 15 January.
With shares trading at a 5.62% fully franked dividend yield, and the expectation that consumer spending power could rebound later in 2024, now could be an opportune time to dig deeper into this company.
Which brings us to home furnishings and white goods retailer Harvey Norman Holdings Ltd (ASX: HVN).
Like JB Hi-Fi, this ASX 200 retail share saw revenues and profits fall in 2023 as consumers delayed non-essential purchases.
And like JB Hi-Fi, the Harvey Norman share price soared 25% from 26 October through to 23 January. Shares are down 2.25% since then.
While the share price may have further to retrace, an uptick in household discretionary spending amid lower inflation and interest rates should, with some expected delay, translate to rebounding sales and profits for the ASX 200 retail share.
Atop a higher share price, that could also see Harvey Norman up its dividends. The retail stock currently trades at a fully franked trailing yield of 5.76%.
An ASX 200 share for all seasons
The third ASX 200 share that could have a big year in 2024 is gaming technology company Aristocrat Leisure Limited (ASX: ALL).
The Aristocrat share price has been on an upward trend for the past 12 months, with shares up 22.51% since this time last year. That tells us that, despite the pressure on household budgets, consumers didn't cut back their gambling spend.
For the 12 months ending 30 September, Aristocrat reported a 13% year on year increase in revenue to $6.3 billion. And it reported that net profit after tax was up 53% to $1.45 billion.
Management also expects to continue to grow profits in 2024. A forecast that should be aided as interest rates and inflation come off the boil.
The ASX 200 share currently trades at a 1.44% fully franked dividend yield.
