Consumer sentiment in the United States has impressed again in March. Strong fiscal support, reopening of the U.S. economy and the coronavirus vaccine rollout may have instilled optimism among consumers. The University of Michigan’s final sentiment index surged to 84.9, comparing favorably to March’s preliminary reading of 83. The metric also beat the median estimate of 83.6, per a Bloomberg poll.

The reading is also up from 76.80 in February but disappoints when compared to 89.10 in the year-ago period.  It is important to note that the survey has covered responses received through Feb 24 to Mar 22, according to the article mentioned above.

The measure of current economic conditions climbed to 93 in March from 86.2 in February, per a Bloomberg article. Moreover, a gauge of consumer expectations was up 9 points to 79.7 in March. Going on, a measure of the economic outlook for next year rose 25 points to 108 in March, hitting the one-year high mark.

The survey report also reflected that consumers are expecting prices to rise 3.1% in the year ahead, down from 3.3% in February. Meanwhile, longer-term inflation expectations increased to 2.8% in March from 2.7% in February and stood out as the highest since July 2015, according to the Bloomberg article.

Current U.S. Economy Scenario

An accelerated coronavirus vaccine rollout, introduction of another round of fiscal stimulus and the reopening of U.S. economy may lead to a path of faster U.S. economic recovery from the coronavirus pandemic-led economic slowdown.

Encouragingly, President Joe Biden now aims at distribution of 200 million coronavirus vaccines within his first 100 days since joining office, per a CNBC article. Notably, at least 100 million coronavirus vaccinations have already been distributed since his inauguration.

Markedly, the unemployment levels are also improving, signaling that the economy is on the mend. The U.S. economy added 379,000 jobs in February 2021 after a revised rise of 166,000 in January, beating market expectations of an increase of 182,000, per verified sources.

Moving on, Biden finally signed the $1.9-trillion coronavirus relief package, also known as the American Rescue Plan Act of 2021, into law. The coronavirus relief bill provides direct support to small businesses, $1,400 direct checks to Americans in the eligibility criteria, a rise in the child tax credit for a year, direct funding to state and local governments along with funding for schools and increased funds for coronavirus vaccine distribution and testing, per a CNBC article.

However, the stimulus checks’ income limits are now revised and the weekly unemployment benefits have been reduced from $400 to $300 by the Senate and will run through September, as stated in the article.

The reopening of the U.S. economy is also boosting confidence. As U.S. economic activities resume and gradually inch toward normalcy, the demand for goods and services is likely to rise.

Meanwhile, the Fed in its commitment to drive economic recovery has decided to maintain rates near zero until 2023, at least. The central bank has lifted its forecast for GDP growth to 6.5% in 2021 from 4.2% stated in December 2020. It has also raised the economic growth forecast from 3.2% to 3.3% for 2022. Moreover, growth is likely to cool down in 2023 to 2.2%. The Fed has predicted the longer-run growth measure at 2.3%.

Importantly, the Fed predicts unemployment to decline to 4.5% from 6.2% at present. This also compares favorably with the 5% forecast in December 2020. The unemployment levels for 2022 and 2023 are expected at 4.2% and 3.7%, respectively. Moreover, the Fed has predicted the longer-run growth measure at 4%.

The Fed’s projections for core inflation as measured by personal consumption expenditures are 2.2% for 2021, 2% for 2022 and 2.1% for 2023 along with the longer-run measure at 2%.

ETFs That Might Gain

The moderate improvement in consumer confidence is likely to boost the consumer discretionary sector, which attracts a major portion of consumer spending. Below, we have highlighted the four most popular funds that target the broader consumer discretionary sector (see all Consumer Discretionary ETFs):

The Consumer Discretionary Select Sector SPDR Fund (XLY Quick QuoteXLY - Free Report)

This is the largest and most popular product in the consumer discretionary space, with AUM of $18.81 billion. It tracks the Consumer Discretionary Select Sector Index. The fund charges 12 basis points (bps) in fees per year and carries a Zacks ETF Rank #2 (Buy), with a Medium-risk outlook (read: ETFs & Stocks to Spring Higher in Key Home Selling Season).

Vanguard Consumer Discretionary ETF (VCR Quick QuoteVCR - Free Report)

This fund currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Index. VCR charges investors 10 bps in annual fees. The product has managed $5.39 billion in its asset base and carries a Zacks ETF Rank #2, with a Medium-risk outlook (read: Consumer Discretionary ETFs to Ride Stimulus & Vaccine Optimism).

First Trust Consumer Discretionary AlphaDEX ETF (FXD Quick QuoteFXD - Free Report)

This fund tracks the StrataQuant Consumer Discretionary Index, which employs the AlphaDEX stock-selection methodology to select stocks from the Russell 1000 Index. FXD has AUM of $1.62 billion. It charges 63 bps in annual fees and has a Zacks ETF Rank #2, with a Medium-risk outlook (read: Will ETFs Rally as US Consumer Confidence Improves in February?).

Fidelity MSCI Consumer Discretionary Index ETF (FDIS Quick QuoteFDIS - Free Report)

This fund tracks the MSCI USA IMI Consumer Discretionary Index. The product has amassed $1.41 billion in its asset base. It charges 8 bps in annual fees from investors and carries a Zacks ETF Rank #2, with a Medium-risk outlook (read: Cash in on the Reopening US Economy Optimism With These ETFs).

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>