Consumers’ optimistic assessment of future economic growth and job market conditions helped September’s preliminary consumer sentiment reach its second-strongest level since 2004.

Lower inflation expectations coupled with confidence in the country’s growing economy drove the sentiment higher, as was reflected across major socioeconomic factions. Consumer optimism prevailed despite worsening living standards in the country and less expectations of nominal income gains in September.

Since consumers’ attitude affects their spending to a great extent, the current sentiment should boost consumer spending in the months to come. And an increase in consumer spending, which accounts for two-thirds of economic activity in the country, should have a positive impact on businesses. Consumer discretionary and retail companies are primarily expected to benefit from this trend.

Therefore, investing in the stocks from these two sectors could lead to you to solid returns. Before we handpick a few stocks for your consideration, let’s take a look at the facts.

Robust September Data

The University of Michigan reported that consumer sentiment hit 100.8 in early September, up from 96.2 in August. This level is not only the second strongest since 2004, but also marks the second highest of the year, behind 101.4 in March.

The Expectations Index, which is a gauge of American sentiment toward a short-term (six months) economic condition, also hit its highest level since July 2004, largely owing to favorable expectations for income and jobs.

Trade Tariffs Remain a Concern

Despite strong consumer sentiment, ongoing U.S. trade disputes with China and other the key trade partners such as the European Union, Mexico, and Canada continue to have a negative impact on consumer’s assessment of the economy. The unfavorable effect of tariffs on domestic economy bothers many, as the conflicts show no signs of settlement.

“While consumers were somewhat more likely to anticipate that the economic expansion would continue uninterrupted over the next five years, nearly as many expected another downturn sometime in the next five years,” Richard Curtin, Surveys of Consumers chief economist, said.

To date, the United States has slapped levies on $50 billion of Chinese exports and is planning to impose another $200 billion tariffs on them. President Donald Trump is considering taxes on $267 billion worth of more Chinese goods, which would put every Chinese export to the U.S. under tariffs.

However, a recent development of possible trade talks between the United States and China has improved sentiment around trade a little since last week. The Trump administration has sent an affirmative reply to Beijing’s call for resuming the talks as more tariffs loom on Chinese goods. A positive outcome is expected if China’s offers seem reasonable.

Stocks to Buy

Adding retail and consumer discretionary stocks to your portfolio seems like a wise decision, as these stand to benefit the most from a strong sentiment.

You may consider betting on the following stocks that carry a Zacks Rank #1 (Strong Buy).

Boot Barn Holdings Inc. (BOOT - Free Report) operates a lifestyle retail chain that sells footwear, apparel and accessories you can wear to work. The company has gained 78.7% year to date. Its earnings for 2018 are expected to grow 64.2%.

DSW Inc. (DSW - Free Report) is a major retailer of apparel, accessories, and footwear. The company operates 514 stores in the country and owns many private-label footwear brands. The Zacks Consensus Estimate for fiscal 2018 has improved 7.4% over the last 30 days. DSW has gained 45.8% year to date.

Michael Kors Holdings Limited (KORS - Free Report) is global retailer of accessories, apparel, and footwear. The company has gained 16.1% year to date. Michael Kors Holdings has expected earnings growth of 11% for 2018.

Johnson Outdoors Inc. (JOUT - Free Report) is a global outdoor recreation company that develops top-quality, innovative products. The company has gained 63% year to date. Johnson Outdoors has expected earnings growth of 46.4% for the current year.