Since the U.S. economy grew 3.5% – the best in the last two years – in the third quarter of 2016, we can easily pronounce that the year 2017 to be a favorable one for the domestic economy. This is especially true given that President-elect Trump has promised fiscal reflation after taking office.

Personal consumption, investment and government expenditure grew faster than anticipated in Q3. Meanwhile, consumer confidence peaked to a 15-year high in December buoyed by a Trump-induced market rally and stable job market. The unemployment rate declined to a nine-year low of 4.6%.

U.S. auto sales came in unexpectedly strong in December thanks to soaring consumer confidence. Industry-wide sales grew 3.1% to 1.69 million in December while sales for the full year went up 0.4% year over year to 17.55 million. Low fuel prices were also catalysts to stellar auto sales (read: Auto Sales Hit Fresh High in 2016: ETFs & Stocks to Ride On).

The world’s largest economy left a bullish mark in every economic indicator, be it consumer confidence, housing numbers, manufacturing activities, corporate profits and currency. Despite a frozen start, the U.S. closed the year on a strong note.

Amid all the positives, investors should note that the Fed’s policy tightening may cause a jump in yields and spell trouble for rate-sensitive sectors. Whatever the case, we have highlighted five sectors and the related ETFs that promise substantial expected growth rate for 2017 and could be better plays in the near term. We also highlight five sector specific stocks that could serve as a buy candidate.

Auto

First Trust NASDAQ Global Auto Index Fund (CARZ - Free Report)

Strong sales data at the end of 2016 excites us to bet on this auto ETF. As per the source, China is expected to be a tailwind to global auto sales in 2017 thanks to increased adoption of new-energy vehicles and smart connected cars.

Also, Morgan Stanley expects the auto industry to experience cyclical benefits this year after a moderate 2016 and projects 2-4% annual growth for this year compared with a 0.4% uptick in 2016 sales.

If we go by the Earnings Trends issued on January 4, 2017, we will see that decline in earnings growth is expected to plateau out as we move from Q4 of 2016. Eventually, the year may see positive earnings growth of 6.9%. All these make us hopeful about the performance of CARZ.

America's Car-Mart Inc. (CRMT - Free Report)

This is an automotive retailer. The stock has a VGM (Value-Growth-Momentum) score of’ ‘B’ at the time of writing. The stock has a Zacks Rank #1 (Strong Buy).

Consumer Discretionary

PowerShares S&P Small-Cap Consumer Discretionary ETF (PSCD - Free Report)

The consumer discretionary sector is expected to see earnings growth of 8% in Q1 of 2017 on 12.8% revenue growth. Growth rates are one of the best in the Zacks-classified S&P 500 sectors. Also, under Trump’s administration, small-cap stocks have higher chances of outperformance. So, we pick PSCD as a potential winner. 

Central Garden & Pet Company (CENT - Free Report)

This is a renowned producer and marketer of products for lawn & garden and pet supplies. The stock has a VGM score of ‘A’ and its Zacks industry rank is in the top 31%. The stock has a Zacks Rank #2 (Buy).

Industrial

First Trust RBA American Industrial Renaissance ETF (AIRR - Free Report)

This fund focuses on small- and mid-cap U.S. companies that hail from the industrial and community banking sectors. With Trump highly expected to bring U.S. manufacturing jobs back to the country and strictly oppose outsourcing, the industrial sector may have started cheering his win (read: 5 Top-Ranked Sector ETFs Thankful to Trump). 

In fact, Trump’s win calls for a rise in the trend of manufacturing ‘reshoring’, instead of offshoring to low cost destinations like China, most of Asia and some parts of Latin America. This makes it clear why we pick AIRR as a 2017 outperformer (read:Manufacturing Reshoring Ahead? ETFs to Profit).

Heritage-Crystal Clean Inc (HCCI - Free Report)

This is a privately held marketing and sales company which is into automotive repair, primarily in the Midwest and Eastern States. It has a VGM score of ‘A’. The stock has a Zacks Rank #1.

REITS

PowerShares KBW Premium Yield Equity REIT ETF (KBWY - Free Report)

REITs can be good picks in 2017 despite worries about rising yields. And if it is a fund like KBWY which yields about 6.55% annually, chances of outperformances go higher in a rising rate environment. Investors should note that the 10-year U.S. Treasury yield was 2.37% at the end of January 5, 2017.

Investors should also take a note that REITs form an asset class which not only benefits from a rebounding economy, but also from an appreciation in the value of real estate assets if held for a longer term. REITs are often viewed as protection against inflation. This explains why KBWY can be a good pick in 2017.

Cherry Hill Mortgage Investment Corporation (CHMI - Free Report)

It is a residential real estate finance company. The stock has a VGM score of ‘A’ and its Zacks industry rank is in the top 30%. The stock has a Zacks Rank #2.

Regional Banks

SPDR S&P Regional Banking ETF (KRE - Free Report)

Historically, financial stocks perform better with republicans in the White House thanks to their tolerant policies. Trump’s intention to ease regulatory policies for small-cap banks should be a positive for the fund. Also, benchmark U.S. Treasury bond yields have seen an uptrend due to both Fed and Trump, giving another boost to financial ETFs like KRE (read: Play Banking Bonanza with These ETFs in Trump World).

Comerica Inc (CMA - Free Report)

It is bank holding company which has three lines of business – business bank, individual bank and investment bank. Its Zacks industry rank is in the top 2%. The stock has a Zacks Rank #1.