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Sell these stocks first as wages rise


Fast food restaurants will also feel the pinch of rising wages. McDonald’s (MCD) is an interesting case of a company that will feel the pain, but will also see some benefits. The good news for McDonald’s is that it does not actually operate most of its U.S. locations. The vast majority of McDonald’s locations are franchised, so the company is partially shielded, but if franchisees feel the pressure to lift prices, sales could start to drop, which would lead to a negative perception of McDonald’s on Wall Street… where growth is everything. At the same time, higher wages will lead to more discretionary income in the pockets of lower-income households, which is the company’s primary customer base. MCD has done a pretty good job returning to sales growth, but if wage hikes lead to fewer employees, or higher prices, and foot traffic starts to stall or even worse decrease, the bears will come out quickly and drive the stock lower.


Chart courtesy of www.stockcharts.com

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Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.