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Consumer Sentiment Soars to Record High: 5 Picks

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On Feb 16, The University of Chicago said that its consumer sentiment index had increased in February to its second-highest level since 2004. The Tax Cuts and Jobs Act of 2017 and continuing resilience in the jobs market were primarily responsible for this increase. These factors helped Americans ignore recent volatility in the equity markets, which threatened to snap a long streak of gains.

Steady growth and resilience in the jobs market have been the highlights of the continuing economic expansion. The impetus generated by recent tax cuts will also help to raise the disposable income of U.S. citizens. This is why this is an excellent time to invest in consumer discretionary stocks.

Second-highest Level in 14 Years

The University of Michigan’s consumer sentiment index increased from 95.7 in January to 99.9 in February. This was the highest level recorded since 2004 and the second highest recorded since the 13-year high hit in October 2017. This reading exceeded most economists’ expectations who had estimated that the gauge would hit between 95.5 and 95.7.  

The current conditions index, which is a gauge of Americans’ opinion about their finances, increased from 110.5 to 115.1. Additionally, the expectations index increased from 86.3 to 90.2. The overall number experienced a 4.4% increase from January’s figure of 95.7. Meanwhile, expectations for current year inflation levels remained unchanged at 2.7%.

Tax Cuts, Jobs Growth Boost Sentiment

The survey indicates that consumers are choosing to concentrate on encouraging economic data. This includes an increase in income levels, a booming job market and other related factors. Such a mindset was not impacted by recent stock market gyrations.

According to the survey’s chief economist Richard Curtin, only 6% of the respondents chose to recall discouraging news related to the equity markets, that too when prompted. Nearly 35% of the respondents provided positive references to government actions. This figure was in line with January’s reading, the highest level recorded in more than 50 years.

Our Choices

The latest reading of the University of Chicago’s consumer sentiment index indicates that American consumers remain upbeat following recent tax cuts. A resilient job market and increasing income levels have also contributed to the uptrend in sentiment.

Adding consumer discretionary stocks to your portfolio looks like a smart option at this point. However, picking winning stocks may be difficult.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score. 

Deckers Outdoor Corporation (DECK - Free Report) is a leading designer, producer, and brand manager of innovative, niche footwear and accessories developed for outdoor sports, and other lifestyle-related activities.

Deckers has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 24.2% over the last 30 days.

MCBC Holdings, Inc. (MCFT - Free Report) is a designer, manufacturer and marketer of MasterCraft brand premium performance sport boats.

MCBC Holdings has a VGM Score of A. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 13.5% over the last 30 days. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Michael Kors Holdings Limited (KORS - Free Report) is a global luxury lifestyle company, founded by designer Michael Kors.

Michael Kors has a Zacks Rank #2 (Buy) and a VGM Score of A. The Zacks Consensus Estimate for the current year has improved by 12.9% over the last 30 days.

Ralph Lauren Corporation (RL - Free Report) is a major designer, marketer and distributor of premium lifestyle products. 

Ralph Lauren has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 6.7% over the last 30 days.

Marriott International Inc. (MAR - Free Report) is a leading worldwide hospitality company focused on lodging management and franchising, after the spin-off of its timeshare business into a publicly traded company in November 2011.

Marriott has a Zacks Rank #2 and a VGM Score of B. The company has expected earnings growth of 21.6% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.9% over the last 30 days.

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