Consumer Sentiment Soars To Record High: 5 Picks
Zacks Investment Research | Feb 19, 2018 07:07AM ET
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 Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.