What happens when rate cuts are on the table as a tech revolution is starting and consumer leaders are showing strength? An environment that's set to supercharge the stock market, says one expert.
Stocks like Apple in consumer tech and Cava in restaurants have the proof.
"These stocks are not seeing recession, at all," Jim Roppel, founder of the Roppel Report, tells Investor's Business Daily's "Investing with IBD" podcast. While advances in technology and the cusp of Apple's AI rollout are helping fuel Apple stock, much of its growth indicates strong consumer spending.
Audio Version Of Podcast Episode
Apple stock is finding support at its 10-week moving average. That action signals a potential buying opportunity for shareholders. Its relative strength line, which measures price performance vs. the S&P 500, has been trending higher for several months.
The tech giant in June broke out of a cup pattern that began in December. The stock is currently 14% above that breakout area. Apple is currently ranked No. 3 in the Telecom-Consumer Products group according to IBD Research, and has an IBD Composite Rating of 91.
The tech company is expected to announce new products, including updates to its flagship iPhone, in September. The updates are expected to include Apple's own take on generative AI.
Apple Stock's Expected AI Boost
Those AI announcements could give Apple stock another boost. Roppel says the tech giant's AI offering, called "Apple Intelligence," will create a new wave of sales as the software spurs a refresh in AI-capable hardware.
"Think about how many iPhones and iPads and laptops are not AI-capable," Roppel said. "If we have a compete hardware refresh, we're talking about an economic boom and Apple is kind of the key here."
Rate Cuts Set To Juice The Economy And Apple Stock
Consumer spending is also fueled by the Federal Reserve's interest rate cuts just on the horizon. Federal Reserve chairman Jerome Powell on Friday strongly signaled upcoming rate cuts in response to a cooling economy. "We're steering 100 basis points of cuts straight into the face of an AI revolution," Roppel said.
Roppel says this economic environment is set to supercharge the stock market. "There's no more bullish scenario than rate cuts into a stable or slightly decelerating economy," he said.
Cava Stock's Case For Strong Consumer Spending
Strong consumer spending is reflected in the growth of fast-casual restaurant chains like Cava stock. "The third best story in the market is a restaurant," said Roppel. "I've been to their stores in Texas, I've been to them in Illinois. There are lines out the door, even at eight at night," he said.
His two other top picks, AI chipmaker Nvidia and weight loss drugmaker Eli Lilly, share similarities with Cava in that they have solid fundamentals and strong price performance.
Roppel says the strength in Cava stock signals the economy is still in good health. Consumers who feel financially secure tend to eat out more, fueling growth at fast-casual chains like Cava.
Cava stock is surging on earnings in the stock market today, continuing its nearly uninterrupted climb that began in November last year. The stock is ranked No. 1 in the Retail-Restaurants group according to IBD Research, and has an IBD Composite Rating of 97.
Roppel says that while not every stock in the consumer spending theme will give investors monster returns, names like Cava stock or Apple stock need to show only steady gains to make investors successful. "Let's say it trends beautifully for five years," said Roppel. "How many stocks like that do you need in your life to change your status, your level in life? Only like five of them."
Tap here to learn about the market bull case that's still building.
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