Consumers Remain Confident: Buy These 5 Top-Rated Picks
Zacks Investment Research | Jun 27, 2017 10:43PM ET
The Consumer Confidence index rose in June, defying expectations of a decline. This comes as a welcome surprise for market watchers, who have received dismal tidings about the economy one after another, over the past few weeks. The most recent example of these reports is the one on durable orders released on Monday that triggered a flight to safer assets.
But consumer confidence data indicates that though consumers have adopted a cautious outlook, they remain optimistic about the economy’s fortunes. The Fed’s most recent pronouncements on these issues have also been positive, with both the Fed Chair and a key official weighing in on the necessity of rate hikes. This is why investing in stocks gaining from consumers’ optimism looks like a smart option at this time.
Consumer Confidence Bucks the Trend
Defying the spate of disappointing reports on the economy, the Consumer Confidence index rebounded to increase from 117.6 in May to 118.9 in June. The Present Situation Index also rose from 140.6 to 146.3. However, the Expectations Index slipped from the level of 102.3 recorded in May to 100.6. Meanwhile, consumers’ estimation of prevailing business conditions has also improved this month.
The Conference Board’s Director of Economic Indicators said that consumers’ outlook about the economy touched a near 16-year high in June. Additionally, even though consumers believe that the pace of growth may remain slow, they expect economic expansion to continue unhindered. Their plans to buy such capital goods as homes and automobiles remain unchanged. Meanwhile, plans to buy purchase major appliances have actually increased.
Strong Labor Market Powering Gains
A strong labor market is widely believed to be the primary reason for consumers’ continuing optimism. One of the most closely watched components of the consumer confidence report is a metric known as the labor market differential. This measure is derived using data from respondents who believe jobs are in abundance and those who think they are tough to secure. In May, the survey’s labor market differential registered the second best reading in 16 years. (Read: Zacks Investment Research
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