Investors should buy shares of consumer companies, especially sellers of beer and cigarettes, as minimum wage hikes kick in and the weather improves this summer, according to Cowen.
"Following our initial work on minimum wage increases in early 2016, we remain constructive on the U.S. consumer, in particular at the lower-end," Cowen's Vivien Azer wrote in a note to clients Wednesday.
"Wage growth data from the BLS as well as the Atlanta Fed continues to point to a healthy lower income consumer," the note read.
Azer cited how 3 million U.S. consumers saw a 5 percent average minimum wage hike on July 1 in several cities (Chicago, Los Angeles and San Francisco) and states (Maryland and Oregon). These events are bullish for consumer stocks because there is an 80 percent correlation between wage growth and spending growth, according to the analyst.
"While there were a handful of consumer and category specific headwinds in 2Q (higher gas prices, slower job growth, and adverse weather trends), growth in overall consumption, consumer credit and housing metrics still accelerated from 1Q, and we maintain a constructive view of the macro backdrop with potential for weather to be better aligned with seasonal trends," the report said.
Higher minimum wages are particularly bullish for tobacco and alcohol companies as they benefit more from the lower income demographic, according to the analyst.
Here are eight overweight-rated consumer stocks Cowen recommends to take advantage of the trend.