The Westpac-Melbourne Institute Index of Consumer Sentiment fell 5.2% in September to 84.4.

Any reading below 100 means pessimists outnumber optimists.

However, some ASX shares actually do better when households run out of confidence.

Why consumer sentiment is important for ASX shares

Assessments of family finances dropped 9.2%, and among homeowners the fall reached 13%.

Nearly two-thirds of consumers now expect mortgage rates to rise within twelve months.

The report stated the following of the cause:

The fall takes sentiment back towards the deeply pessimistic levels seen earlier in the year. Both fuel prices and interest rates again look to be driving the move.

Consumer discretionary shares were the worst sector on the ASX on Tuesday, falling 1.88%.

Trouble right? Well, the businesses that sell things households cannot easily cancel are in a different position entirely.

Woolworths sells everyday fundamentals

Woolworths Group Ltd (ASX: WOW) is the most obvious beneficiary on the market.

People trade down within a supermarket, but they do not stop buying groceries.

FY26 showed this phenomenon in action.

Group sales rose 3.6% to $71.54 billion and earnings before interest and tax before significant items climbed 12.7% to $3.11 billion.

Net profit before significant items jumped 15.4% to $1.60 billion.

The Australian Food business lifted sales 4.6% and EBIT 8.5%, while BIG W returned to profit after a loss.

Group eCommerce sales grew 15.9% to $10.6 billion and the final fully franked dividend rose 15.6% to 52 cents.

Chief executive Amanda Bardwell was clear about the challenges facing the company:

Looking ahead, while we expect the challenging economic environment to continue with household budgets remaining under pressure, our strategy to deliver low prices and the best range and convenience gives us confidence we can be first choice for customers while delivering for our team and shareholders in the year ahead.

Telstra sells the second last thing to be cut

Telstra Group Ltd (ASX: TLS) is on the same side of the coin.

That is because nobody cancels their mobile plan because the Reserve Bank raised rates.

FY26 revenue actually fell 0.8% to $22.94 billion, which sounds unimpressive until you look further down.

Underlying net profit after tax rose 4.9% to $2.5 billion and cash earnings per share climbed 14% to 25.5 cents.

Underlying EBITDA after leases increased 4% to $8.3 billion, and management guided FY27 to between $8.5 billion and $8.8 billion.

Mobile income grew 3% to $11.4 billion.

The dividend is the attraction here.

Telstra lifted its full-year payout 10.5% to 21 cents and announced a buyback of up to $1 billion.

At $4.79 that is a yield of about 4.4%, or roughly 6% once franking credits are counted.

Foolish takeaway

Defensive ASX shares are not exciting, and they are not supposed to be.

But what they do is keep earning while the discretionary end of the market repriced 1.88% lower in a single session.

I find Telstra the better value of the two today, purely because Woolworths has already been rerated.

The mistake would be buying either one expecting them to rise when sentiment recovers.

The post Consumer sentiment is low. These ASX shares stand to benefit appeared first on The Motley Fool Australia.

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Motley Fool contributor Mark Verhoeven has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

On Tuesday, the S&P/ASX 200 Index (ASX: XJO) had a disappointing session and dropped deep into the red. The benchmark index fell 1% to 8,920.8 points.

Will the market be able to bounce back from this on Wednesday? Here are five things to watch:

ASX 200 to rise

The Australian share market looks set for a better session on Wednesday despite a poor night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 17 points or 0.2% higher. In the United States, the Dow Jones fell 1.2%, the S&P 500 dropped 0.6%, and the Nasdaq was 0.3% lower.

Oil prices jump

ASX 200 energy shares including Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) could have a good session on Wednesday after oil prices jumped overnight. According to Bloomberg, the WTI crude oil price is up 3% to US$94.25 a barrel and the Brent crude oil price is up 2.4% to US$99.36 a barrel. This follows reports of an Iranian attack on US Navy ships.

Accumulate Paladin Energy shares

Morgans has been looking at Paladin Energy Ltd (ASX: PDN) and particularly the Patterson Lake South resource. In response, it has maintained its accumulate rating with a trimmed price target of $13.30. It said: “We expect the resource and mine life to increase materially in time. Simply simple – PLS is one of the highest-grade undeveloped uranium projects globally, but its development plan is surprisingly conventional, with a TBM decline, proven mining methods, a standard Athabasca processing flowsheet and uncomplicated tailings storage reducing technical risk. We maintain an ACCUMULATE rating with a reduced price target A$13.30ps (previously A$14.10ps) with the removal of our 10% price premium.”

Gold price falls

ASX 200 gold shares including Westgold Resources Ltd (ASX: WGX) and Northern Star Resources Ltd (ASX: NST) could have a poor session on Wednesday after the gold price pulled back meaningfully. According to CNBC, the gold futures price is down 1.7% to US$4,400 an ounce. Traders were selling gold ahead of the release of US inflation data.

ASX 200 shares going ex-dividend

A number of ASX 200 shares are going ex-dividend today and could trade lower. This includes Brambles Ltd (ASX: BXB), CSL Ltd (ASX: CSL), Evolution Mining Ltd (ASX: EVN), IGO Ltd (ASX: IGO), and Northern Star. CSL will be paying shareholders 227.7 cents per share early next month on 2 October.

The post 5 things to watch on the ASX 200 on Wednesday appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Zip shares have halved over the past year, but the analyst community has not budged an inch.

Every broker covering the company still rates it a buy.

What’s more, the average price target implies the shares roughly doubling from here.

Why brokers are so bullish on Zip shares

Zip Co Ltd (ASX: ZIP) closed Tuesday at $2.31, down 2.94% on the day.

Shares have fallen 49.12% over twelve months and 25.84% year to date. The 52-week range runs from $1.37 to $4.93.

All twelve analysts covering the company hold a buy or strong buy rating.

The average target of $4.56 implies around 95% upside, and the most bullish sits at $6.03.

UBS has reiterated a buy rating with a $4.70 target, pointing to the defensive qualities of the buy now, pay later model in weaker economic conditions.

The FY26 result behind the call

The numbers are part of the reason the brokers have not capitulated.

Zip delivered record cash EBTDA of $268.9 million in FY26, up 57.9%.

Total revenue rose 24.7% to $1,336.1 million and total transaction value climbed 27.2% to $16.7 billion.

Net profit after tax increased 45.7% to $116.4 million.

The margin story is arguably more important than the growth.

Operating margin expanded from 15.8% to 20.0% in a single year.

The company also completed $150 million of buybacks and announced a further $50 million for FY27, with available cash and liquidity of $246.5 million.

Group chief executive Cynthia Scott put the result in context:

Consistent execution has built the platform to deliver our next phase of growth and innovation. In FY26, we exceeded our targets with record cash earnings of $268.9m, up 57.9%, underpinned by material cash earnings growth in both markets. We maintained strong unit economics, expanded operating leverage and reinforced the value of our differentiated business model.

The United States is the whole story

Importantly for Zip, the American business now generates roughly two-thirds of group revenue.

Transaction volume and revenue both grew more than 42% there in local currency terms.

Active United States customers rose 9.3% to 4.65 million.

The Australian and New Zealand business is going the other way, with customer numbers down 8% to 1.88 million.

Management is winding down the New Zealand operation entirely to concentrate on Australia.

Guidance for FY27 calls for group cash EBTDA of $340 million, up around 26%.

The operating margin target is 20% to 22% and United States transaction volume is expected to grow more than 30%.

Zip is also weighing a share consolidation and a possible dual listing on the Nasdaq.

What has gone wrong for Zip shares

The share price fall has very little to do with the accounts.

Three things have worked against it at once.

The first is a broad sell-off in technology and high-multiple names.

The second is competition, with the buy now, pay later market crowded and margins under permanent scrutiny.

The third, and perhaps most important, is interest rates.

Zip lends money to consumers, which makes it geared to household health in both directions.

Consumer sentiment fell 5.2% in September to 84.4, with nearly two-thirds of consumers expecting mortgage rates to rise within a year.

All four major banks now forecast another rate rise before the end of 2026.

Foolish takeaway

The bull case for Zip shares is not overly complicated.

Earnings are growing fast, margins are expanding and the United States business is scaling.

The bear case is that none of that has been tested through a true consumer downturn. Only time will tell for Zip shares.

The post Can Zip shares recover? Here’s what the experts have to say appeared first on The Motley Fool Australia.

More reading

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• ASX 200 bank shares led a financial sector rebound last week
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• Why Zip shares took investors on a wild ride in August

Motley Fool contributor Mark Verhoeven has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.