The White House Confirms Economy Is Firming Up: Top 5 Gainers

The White House issued a statement on Mar 27 underlining Trump administration’s efforts to bolster economic growth. The White House categorically said that consumer and business sentiments continue to improve as Trump’s business-friendly policies are aiding the U.S. economy expand after eight years of stagnation. That’s welcome news coming from a White House that has been in the eye of the storm of late.

Since Americans gained optimism over an improving economy and declining unemployment, things have been looking up for consumer discretionary stocks.

Tax Cut Policy

Corporate America has received a massive permanent tax break, which will boost profit margin. The House of Representatives approved the biggest overhaul of the U.S. tax code in 30 years. In a headline-grabbing move, the corporate tax rate was lowered from 35% to 21%. Republicans also repealed the 20% corporate alternative minimum tax, while any income brought back from overseas will be taxed 8% to 15.5%, instead of the current 35% (read more: GOP Passes Landmark Tax Bill: Best & Worst for Stocks).

Thanks to the new GOP tax reform law, a staggering 89% of companies plan to enhance compensation to their employees, per the EY Tax Reform Dollar Deployment Survey, conducted jointly by Ernst & Young LLP’s Transaction Advisory Services and tax businesses. EY Americas Vice Chair Bill Casey added that “we’re seeing that the majority of the savings from tax reform is going to be put back in growth and innovation, which is great news for the U.S. economy.”

Economy in Good Shape

The U.S. economy is in the pink of health, soaring to the highest point since President George W. Bush had taken office, according to Pew Research Center. The survey showed that more than half of the Americans rate the economy high, saying that it is in best shape in nearly 18 years.

The National Association for Business Economics, in the meantime, estimated that the economy will expand at an annualized rate of 2.9% this year, compared with 2.5% projected last December. Kevin Swift, the group’s vice president said that the “NABE Outlook panelists are more optimistic about the U.S. economy in 2018 than they were three months ago.”

Labor Market Strengthens

Unemployment rate has been a cause of concern for Americans for the past two years. But, now the jobless rate is near a 17-year low, while the number of Americans worried about unemployment rate down to 36% from the high of 59% in 2010, as per GALLUP.

Initial jobless claims remain near the lowest level since 1970 and the number of people collecting unemployment benefits tanked to a fresh 45-year low. Job openings, on the other hand, continue to increase by around 645,000 to a seasonally adjusted 6.3 million.

The U.S. Agriculture Department added that “the number of food stamp dependent Americans hit a six-year low in President Donald Trump’s first year in office, reflecting robust economy and drop in unemployment.”

Consumer Sentiments Upbeat

American consumers are gaining confidence in the current state of the economy. Consumer confidence did crush expectations and hit a fresh 14-year high this month as households felt more optimistic about the economy, according to the University of Michigan.

The Consumer confidence index, however, dropped to 127.7 this month from a revised 130 in February. However, it stayed put near an 18-year high. Lynn Franco, director of Consumer Conference Board, said that “despite the modest retreat in confidence, index levels remain historically high and suggest further strong growth in the months ahead.”

5 Stocks to Gain

With consumer confidence holding up well, picking consumer discretionary stocks will be a smart move. Solid consumer sentiment, historically, has been good at predicting spending levels for the next three to six months. More the confidence households generate the more will they spend.

We have, thus, selected five consumer discretionary stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). Such stocks boast a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.

Deckers Outdoor Corporation (NYSE:DECK) designs, markets, and distributes footwear, apparel, and accessories for casual lifestyle use and high performance activities. The stock has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings rose 24.3% in the last 60 days. The company is expected to return 42.3% this year, higher than the industry’s projected return of 7.3%.

Malibu Boats, Inc. (NASDAQ:MBUU) designs, manufactures, distributes, markets, and sells recreational powerboats. The stock has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings moved up 13.1% in the last 60 days. The company is expected to return 44.2% this year, better than the industry’s estimated return of 24.9%.

Guess', Inc. (NYSE:GES) designs, markets, distributes, and licenses lifestyle collections of apparel and accessories for men, women, and children. The stock has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings climbed 14.3% in the last 60 days. The company is expected to return 37.1% this year, higher than the industry’s estimated return of 13.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Time Warner Inc. (NYSE:TWX) operates as a media and entertainment company in the United States and internationally. The stock has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings rose 16.7% in the last 60 days. The company is expected to return 19.5% this year, higher than the industry’s projected return of 10.6%.

Wolverine World Wide, Inc. (NYSE:WWW) designs, manufactures, sources, markets, licenses, and distributes footwear, apparel, and accessories. The stock has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings rose 4.7% in the last 60 days. The company is expected to return 23.2% this year, higher than the industry’s estimated return of 7.3%.

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