After the much-talked about Presidential election wherein Donald Trump triumphed over Hillary Clinton, the market has its eyes set on the Federal Reserve that hinted at a rate hike in December at its last meeting. Undoubtedly, the economy is picking up steam, with inflation gradually edging toward the desired 2% target and strength in the job market. Together, these have set the stage for a rate hike this month.

So have you braced yourself up for the move? Perhaps you have, if you follow the tide. Speculation is rife that the Federal Reserve may reach a consensus to raise the benchmark interest rate, when it meets today. In Dec 2015, the Federal Reserve raised interest rates for the first time in almost a decade to a range of 0.25%−0.50%. Currently, the market is bracing for at least another quarter-point increase.   

Is the Economy on Track for a Rate Hike?

A slew of economic data suggests that the environment is much conducive now and Janet Yellen may have little difficulty in arriving at a decision. Post Brexit, the U.S. economy looks much steady. The second estimate for GDP shows that the U.S. economy grew 3.2% in the third quarter, faring better than the first estimate of 2.9% growth and the second-quarter anemic increase of 1.4%.

Another factor that makes the case strong for a rate hike is the rise in consumer confidence. According to the recent Conference Board data, the Consumer Confidence Index rose to 107.1 in November from October’s upward revised reading of 100.8, and is at its highest level in nine years. Per the preliminary reading of University of Michigan, Consumer Sentiment increased to 98 in December from 93.8 in November. Trump’s future policies will play a crucial role in defining consumer sentiment but for now, all seems well.

Per the Labor Department, the economy added 178,000 jobs in November, up from 142,000 in October. Moreover, unemployment rate trickled to 4.6% last month from 4.9% in October, marking the lowest level reached in nine years. Given an improving labor market and the gradual rise in wages, we expect consumer spending to improve. Consumer spending increased 2.8% in the third quarter compared with 2.1% anticipated earlier. The Commerce Department recently unveiled that consumer spending advanced 0.3% in October.

The optimism over the health of the economy gets a further boost from the recent U.S. factory activity data. The Institute for Supply Management (ISM) stated that the index of national factory rose to 53.2 in November from 51.9 in October. Non-manufacturing activity index jumped to 57.2 in November from October’s reading of 54.8 and reached the highest level since 58.3 recorded in Oct 2015.

Of course, the economy is not in bad shape. The reasons for the rate hike are on the table and Fed officials may have no problem implementing it, after due consideration of the global as well as domestic economic climate.

5 Prominent Value Picks

Concerns over how the domestic and global stock markets will react to a rate hike are not entirely baseless. But if the Fed decides to go for a raise, will it arrest the bullish run in equities? Nothing concrete can be said on this. Instead of finding an answer to this, it will be better to focus on sectors that are likely to benefit from the move and pick some value-intrinsic stocks.

Here we have highlighted five value stocks from the financial, technology and consumer discretionary sectors that have a favorable combination of a solid Zacks Rank and a sound Value Score. Our research shows that stocks with a Style Score of “A” or “B” when combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) offer the best upside potential.

Investar Holding Corporation (ISTR Quick QuoteISTR - Free Report) , which operates as the holding company for Investar Bank that provides various commercial banking products and services, is a solid bet, with a Value Score of “B”. The company has a P/E of 17.18x and P/S of 3.37x, which are trading at a discount to the industry average P/E and P/S of 19.54x and 4.26x, respectively. In the past six months, the stock has surged roughly 25.5% and outperformed the Zacks categorized Finance industry, which gained 20.6%. The stock flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

We also suggest investing in Eagle Bancorp Montana, Inc. (EBMT Quick QuoteEBMT - Free Report) . It operates as the holding company for Opportunity Bank of Montana that provides various retail banking products and services. The stock has a Value Score of “B” and a Zacks Rank #1. The company possesses a P/S of 2.17x and P/E of 15.95x. Compared to the industry at large, this is pretty favorable as the overall space has an average P/S and P/E of 4.35x and 19.07x, respectively. In the past six months, the stock has surged roughly 62% and comfortably outperformed the Zacks categorized Finance industry, which increased 20.6%.

Another Zacks Rank #1 stock that investors may look forward to is Applied Materials, Inc. (AMAT Quick QuoteAMAT - Free Report) with a Value Score of “B.” This provider of manufacturing equipment, services, and software to the semiconductor, display, solar photovoltaic and related industries possesses a P/E of 13.31x and P/S of 2.70x, which are at a discount to the industry average of 14.78x and 3.67x, respectively. In the past six months, the stock has advanced roughly 34.8%, while the Zacks categorized Computer and Technology industry has jumped 10.3%.

Investors may also consider Amkor Technology, Inc. (AMKR Quick QuoteAMKR - Free Report) with a Value Score of “A” and a Zacks Rank #2. This provider of outsourced semiconductor packaging and test services possesses a P/B of 1.92x and P/S of 0.65x. Compare this to the industry average of 2.59x and 2.34x, respectively, and it will be safe to consider the stock as adequately undervalued than its peers, at least on these metrics. In the past six months, the stock has soared about 75.4% compared with the Zacks categorized Computer and Technology industry that increased just about 10.3%.

You can also count on Caleres, Inc. (CAL Quick QuoteCAL - Free Report) , retailer and wholesaler of footwear, carrying a Zacks Rank #2 and a Value Score of “A.” The company has a P/E of 17.16x and P/S of 0.59x, which are trading at a discount to the industry average P/E and P/S of 18.44x and 1.44x, respectively. In the past six months, the stock has risen approximately 46%, while the Zacks categorized Consumer Discretionary industry has increased 10.4%.

Final Verdict

Several factors, whether domestic or overseas, have directly or indirectly impacted the Fed’s decision in the past, and led to the postponement of the rate hike. However, the economic scenario has changed for the better, thus providing enough leeway for a rate hike.

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