6 Top Stocks To Buy As Consumer Confidence Hits 6-Month High
Zacks Investment Research | May 28, 2019 09:04PM ET
Consumer confidence surged to a record level this month, defying economic headwinds such as the U.S.-China trade war and higher gasoline prices. Equity market volatility also seemed to have little impact on the American consumer, who remained optimistic even amid multiple macroeconomic concerns.
The reading was in line with the University of Michigan’s latest consumer sentiment numbers, which also reflected the bullishness of U.S. consumers. Critics argue that data for these surveys was captured before trade ties worsened early this month.
However, a strong jobs market remains the key catalyst for the rise in consumer confidence. Since hiring remains strong and the domestic economy remains resilient, it makes sense to pick consumer discretionary stocks at this time.
Consumers Remain Confident Among Multiple Headwinds
In May, the Conference Board’s Consumer Confidence Index increased from 129.2 in April to 134.1. This is significantly higher than the estimated level of 129.5 and the highest reading since November 2018. The Expectations Index which measures consumers’ opinion about business, income and labor market conditions over the next six months increased from 102.7 to 106.6.
The Present Situation Index , which gauges consumers’ opinion about present-day labor market and business conditions increased from 169 to 175.2, the highest level in 18 and a half years. The last time that the index breached this level was during December 2000.
Consumer confidence numbers were largely in line with the University of Michigan’s consumer sentiment data released earlier this month. The university’s consumer sentiment index increased 5.3% to 102.4, the highest level in 15 years. Of course, the reading was captured before the trade war worsened. But its direction remains largely valid, going by the fresh consumer confidence data.
Strong Labor Market Empowering American Consumer
The U.S. economy added 196,000 jobs in March, easily exceeding the consensus estimate of 184,000. Revisions to January and February’s gains took the first quarter’s average job gains to a solid 180,000. The rebound in hiring ensured that the unemployment rate for March was unchanged at a 50-year low of 3.8%. (Read: Zacks Investment Research
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