In this article, we discuss the 13 best affordable stocks under $40. You can skip our detailed analysis of the current stock market investment trends, and go directly to read 5 Best Affordable Stocks Under $40.
Despite robust signals in the economy, consumer sentiment took a hit as inflation expectations surged, as per a widely observed survey released on May 10. The University of Michigan Survey of Consumers sentiment index for May revealed an initial reading of 67.4 for the month, marking a notable decline from April’s 77.2 and falling short of the Dow Jones consensus forecast of 76. This represented a month-over-month decrease of 12.7%, but a year-over-year increase of 14.2%. Alongside the subdued sentiment measure, there was an uptick in inflation expectations for both the one- and five-year horizons. The one-year outlook climbed to 3.5%, rising by 0.3 percentage points from the previous month to reach its highest level since November. The report came in despite a strong stock market rally and a slight decrease in gasoline prices.
During their meeting on May 1, Federal Reserve officials emphasized the need for “greater confidence” that inflation is gradually returning to their 2% target before considering any interest rate cuts. Policymakers view inflation expectations as crucial in managing inflation, and recent data from the Michigan survey indicates consecutive months of increases, following a significant decline between November and March. Market expectations suggest strong anticipation that the Fed will begin reducing its key borrowing rate in September, having kept it at its highest level in over two decades since July 2023. However, the outlook has been variable, despite Federal Reserve Chair Jerome Powell indicating in his post-meeting press conference that the central bank’s next move is unlikely to be a rate hike. “Inflation is still too high,” he stated. “Further progress in bringing it down is not assured and the path forward is uncertain.” That said, investors reacted positively to Powell’s remarks, with the Dow Jones Industrial Average surging following the comments, climbing by as much as 500 points.
Most economists agree with the Fed’s assessment that inflation indicators will gradually ease throughout the year, bringing the central bank closer to its 2% annual target. However, the key question is how much assurance cautious policymakers will require and how swiftly they’ll act without appearing indecisive about their commitment to price stability. According to Citigroup economist Andrew Hollenhorst, Powell’s remarks align with the expectation that the Fed will move to lower interest rates once either core inflation data softens or labor market conditions weaken. If inflation numbers decline and there’s a significant deterioration in the job market outlook, the Fed is likely to commence rate cuts in July, continuing until it has reduced its benchmark rate by a full percentage point by the year’s end.
In another vein, while most indicators in the labor market remained positive, jobless claims reached their highest level since late August, with the Labor Department reporting that seasonally adjusted initial jobless claims totaled 231,000 for the week ending May 4, marking an increase of 22,000 from the previous period. This figure exceeded the Dow Jones estimate, which had projected 214,000 initial jobless claims for the same week. Speaking on this, Robert Frick, corporate economist at Navy Federal Credit Union, made the following remarks:
“A low number of claims had become almost monotonous, and while this surprising spike could well be a blip, we should expect more volatility and a trend toward higher claims as the labor market normalizes.
Given the current climate in the market, the smart investor seeks out stocks that offer both profitability and affordability, offering a way to navigate through ever-changing macroeconomic conditions. While these stocks may not provide the same level of stability as mega-cap firms such as Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Apple Inc. (NASDAQ:AAPL), they do present an opportunity for decent short-term returns due to their volatility. In this context, some of the best affordable stocks include Verizon Communications Inc. (NYSE:VZ), Pfizer Inc. (NYSE:PFE), and Bank of America Corporation (NYSE:BAC), along with others listed below.
Some of the best affordable stocks hedge funds are buying are:
- UiPath Inc. (NYSE:PATH)
- Kinder Morgan Inc (NYSE:KMI)
- Barrick Gold Corp (NYSE:GOLD)
- The Kraft Heinz Company (NASDAQ:KHC)
Read on to find out more affordable stocks and the reasons that make them attractive in the current environment.
Photo by Vitaly Taranov on Unsplash
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