Despite apprehensions of a second wave of coronavirus in the United States, consumer confidence received a significant boost as the country continues to advance with its plans to reopen the economy by relaxing the “stay-at-home” restrictions across 50 states.
This is evident from a spike in the Conference Board’s Consumer Confidence Index. In June 2020, the index surged to 98.1 from 85.9 in May 2020, which reflected almost no change. This sequential rise was above the expected mark of 91 as reported by CNBC.
Trump’s strong stimulus plan worth $1 trillion, revamping economic activities driven by re-opening shops, restaurants, malls and other public places, improving labour market conditions are anticipated to accelerate the production and expenditure in the U.S. economy in the near term. This, in turn, is likely to boost consumer sentiments further.
We believe this optimism in consumer confidence is likely to bolster personal spending, which in turn bodes well for the consumer discretionary sector. Notably, the sector currently holds lucrative prospects.
Reportedly, this particular sector has witnessed a sequential gain of 32.6%in second-quarter 2020 driven by the abovementioned factors.
More on Unemployment, Consumer Expectations & Spending
The declining unemployment rate in the United States remains encouraging. Several businesses in the country are creating more jobs amid the ongoing pandemic situation.
According to the U.S. Bureau of Labour Statistics, the unemployment rate in May declined to 13.3% in May from 14.7% in April. Further, 2.5 million of jobs were created alone in May.
The organization expected a further dip in the unemployment rate to 12.2% in June and creation of another 3 million jobs.
This improving scenario is contributing to the overall consumer spending. Per the Bureau of Economic Analysis, the personal consumption expenditure in May reflected a solid rebound, improving 8.2% from April when it declined 12.6% sequentially.
Further, this momentum is likely to continue as the U.S. economy reopens.
The surge in the Conference Board’s Expectation Index, which is based on the short-term outlook of consumers for income, business and labor market condition, is testament to the same. Notably, the index rose 106 in June from 97.6 in May.
Per the Zacks’ proprietary methodology, stocks with the combination of a VGM Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer solid investment opportunities.
Based on this, here we pick fiveconsumer discretionary stocks that boast a perfect mix of elements and strong fundamentals. You can see the complete list of today’s Zacks #1 Rank stocks here.
BJ's Wholesale Club Holdings, Inc. (BJ - Free Report) is riding on its robust digital business,which is progressing well with omni-channel transformation. Further, the launch of platforms such as BJ’s mobile app and BOPIC — buy online, pick up in-club— remains a major positive. Further, the introduction of same-day delivery and ship from club to cater to the rising member demands has been contributing to performance.
BJ currently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its fiscal 2021 earnings has climbed 28.5% to $2.21 per share over the past 60 days, indicating year-over-year improvement of 51.4%.