Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

As investors move into 2024, a new macro landscape is approaching. In Q3 2023, credit card delinquencies rose above the pre-lockdown Q4’19 level, now at 2.98%. Zoomed out, this is the fastest pace in nearly 30 years, notwithstanding the Great Financial Crisis (GFC) period between 2007 and 2009.

Tellingly, debt delinquencies are seeing the highest growth among millennials, student loan takers, and those with auto loans. Per the New York Fed report, average rejection rates for credit cards, auto loans, and mortgage loan refinance applications exceeded 2022, having increased to 19.6% this year.

Total household debt increased to $17.29 trillion in the third quarter, of which $4.8 trillion is non-housing debt. Suffice it to say, further debt loading and delinquencies are expected moving from Q4 into 2024, owing to a new high interest rate environment combined with inflation still far from reaching the Fed’s 2% target.

With this consumer weakening in mind, which stocks have what it takes to power through 2024? All three of these stocks have wide economic moats, meaning their competitors have a slim chance of eroding their market share.

Walmart (NYSE: WMT)

Walmart is a streamlined retail chain equipped to deal with economic downturns. Regardless of consumer weakening, people still need the essentials Walmart prominently provides. In the Q3 earnings report this month, the retailer generated 5.2% higher quarterly revenue at $160.8 billion.

Walmart’s eCommerce division for pickup and delivery rose 24%, with a 26% increase in Walmart Connect sales. With increased sales volume, Walmart is again a low-price refuge for consumers.

Considering the 37-point operating margin contraction, owed largely to store remodeling and consumer weakening, Walmart’s FY24 guidance leads to a 5 – 5.5% consolidated net sales increase. Adjusted earnings per share (EPS) is expected to land between $6.40 and $6.48 per share.

Investors took this guidance as less than ideal, causing the WMT shares to drop -3.5% over the month. Yet, Walmart is well positioned to power through 2024 as either a long-term proposition or an aristocratic dividend stock among consumer staples.

Based on 34 analyst inputs pulled by Nasdaq, WMT stock is a “strong buy.” The average WMT price target is $180.79 vs the current $155.68. The high estimate is $210, while the low forecast is $163 per share.

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Norfolk Southern Corporation (NYSE: NSC)

Unlike the highly competitive airline industry, the leading North American railway freighter holds a wide moat. Shippers tend to stay with NSC due to high switching costs that necessitate specialized equipment.

Moreover, NSC has the densest rail network covering the eastern US, giving the company a competitive edge. Despite the capital intensity of the sector, NSC managed to increase its quarterly dividend yield to 2.55%, beating the industrial average of 2.36%.

Although Q3 earnings missed EPS expectations of $2.74 at $2.65 EPS, the guidance emboldened investors over the month, boosting NSC stock by 9%.

“The market will recover and we will be poised and leveraged to capture growth with strong incremental margins.” Luke Nichols, Senior Director:Investor Relations at Norfolk Southern Corp.

In particular, Nichols noted higher volume gains, improved service, and a 40% year-over-year reduction in the accident rate. NSC suffered a 13% drop in February due to the East Palestine incident. The stock is still under discount because Norfolk is not going anywhere.

Based on 25 analyst inputs pulled by Nasdaq, NSC stock is a “buy.” The average NSC price target is $222 vs current $215. The high estimate is $252, while the low forecast is $170 per share.

Home Depot (NYSE: HD)

The proposition for Home Depot is similar to Walmart. Focusing on the economics of scale, Home Depot is the strongest home improvement retailer in the country. Its logistics covers over 2,000 stores and 90 distribution centers, making it relatively recession-proof.

Over the month, HD stock is up +8.7%. The company’s Q3 earnings report showed a 5% increase in online sales compared to Lowe’s 4% decline for the same quarter. With that said, consumer weakening is showing up. HD’s total comparable sales decreased 3.1%, decreasing net earnings from year-ago’s $4.3 billion to $3.8 billion.

Home Depot’s direct competitor, Lowe’s (NYSE: LOW), reported even worse figures, with comparable sales down 7.4%. For investors, the online sales discrepancy between the two showed the stronger branding horse.

Based on 32 analyst inputs pulled by Nasdaq, HD stock is a “strong buy.” The average HD stock price is $331.28 vs. the current price of $310.50. The high estimate is $365, while the low forecast is $245 per share. If the Fed starts cutting rates during 2024, people will likely engage in larger home improvement commitments.

Do you think exposure to high-growth tech stocks is a good idea during a recession, compared to consumer staples exposure? Let us know in the comments below.