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(Story updated to add that Dollar General's fourth-quarter earnings rose 31%.)
TheStreet) -- Perhaps the best suggestion for investors seeking new opportunities is to stick with consumer-oriented stocks with a U.S. focus.
At least that's what S&P Capital IQ is suggesting. That's because the recent strong performance of "more globally insulated, domestic sectors like consumer discretionary, financials and information technology" will continue as the Federal Reserve hints that it's not yet done priming the pump for a U.S. economic recovery. All the while, macro-economic jitters continue to emanate from Greece and China, putting a damper on international growth stocks.
"We see this grudging rally persisting with U.S.-focused, globally insulated sectors likely continuing to lead the way," said Alec Young, S&P Capital IQ's global equity strategist, in a research note Tuesday.
S&P specifically recommends an "overweight" to consumer companies as consumer-discretionary stocks are seen "benefiting from the Fed's accommodation and improving U.S. news flow," and consumer-staples stocks "from inelastic demand and strong dividend growth."
Underscoring that, S&P's Consumer Discretionary Index is working on its 11th weekly gain in 12 weeks, "one of the most consistent runs for the discretionary sector since 1998," said Young. The S&P Consumer Staples Index is heading toward its eighth straight positive week.
Consumer-discretionary stocks are up an average of 14.5% this year, while consumer staples are up 3.5%. The
S&P 500 Index has risen 12.9%.
S&P also suggests an overweight to the industrials sector on the basis of "easy U.S. and European monetary policy," while noting that it is more globally oriented and highly cyclical, and hence potentially more volatile.
For the market in general, Young said that while U.S. corporate earnings growth has slowed sharply this quarter and many stocks are approaching full value on a price-to-earnings basis due to the sustained rally, "we see few catalysts for a major near-term setback given unprecedentedly easy global monetary policy."
That's because "whenever equity markets have recently wobbled amid growth fears, central bankers have been quick to reassure, rekindling risk appetite. Look no further than the latest surge to new highs (Monday) likely triggered by (Federal Reserve Bank) Chairman Bernanke's assertion that accommodative policy is still needed to ensure a self-sustaining recovery."
Here are 10 stocks from the consumer-staples and consumer-discretionary sectors with excellent long-term prospects ranked in inverse order of the number of analysts' "buy" ratings: