There has been slow but steady economic recovery since the second half of 2014 leading to better job prospects, improved business momentum and renewed optimism. Housing recovery, rising wages and cheaper fuel are the other positives. Even though the U.S. economy faltered a bit in the first quarter of the year, it was mostly due to a stronger dollar and a harsh winter.

The consumer discretionary sector has caught brokers’ attention as people are now willing to spend on discretionary items, albeit conservatively. The sector manufactures products that consumers buy because they want to and not because they need to.

Companies operating in this space include fast-food restaurants, providers of entertainment products and services, makers of automobiles, textiles, apparels and luxury goods etc. These products and services will only be sought by consumers if they have sufficient disposable income.

Currently, low supply in the market and an improving job market are being partially offset by a tighter credit market and fierce retail competition. Amid this environment, consumers are carefully spending their savings on discretionary items. Given the scenario, Charles Schwab Corp. gives the sector a Marketperform rating.

However, as sluggish growth in the first few months of 2014 was followed by robust growth later in the year, market analysts expect the trend to be similar this year as well.

Modest Second Quarter So Far

Given the mixed data, it seems that growth in the second quarter is likely to be moderate. Consumer sentiment fell for the month of May, possibly because Americans are less confident about economic conditions in the near term. Meanwhile, U.S home-builder confidence also fell in May – marking the fourth instance of decline in five months.

These negatives were offset by the Consumer Confidence Index that showed modest improvement in May after declining in April. Meanwhile, after going down for three straight months, the Present Situation Index increased, thanks to positivity seen in the labor market. Additionally, the Expectation Index was relatively flat in May, after falling in Apr 2015.

While conditions in the second quarter so far appear to be mixed, consumers still remain cautious. This stance possibly reflects the continued appreciation of the U.S. dollar relative to most foreign currencies, which would continue to act as a near-term headwind to the earnings of U.S.-based consumer discretionary companies with significant international operations.

Other risks include potential price wars, a competitive environment, slowdown in international markets (mainly China), political turmoil in Russia, sluggishness in Japan and an unfavorable economic environment in Europe.

Amid these ups and downs, it may be a good idea to look at four consumer discretionary stocks that are preferred by brokers. These stocks have a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) and have been given Strong Buy/Buy rating by 80% or more brokers.

Headquartered in Tokyo, Japan, Sony Corporation (SNE - Snapshot Report) is a developer and seller of electronic equipment, instruments and devices for consumer, professional, and industrial markets worldwide. Sony is part of the audio video products industry. All brokers covering this Zacks Rank #1 stock rate it as a Strong Buy.

Malibu Boats, Inc. (MBUU - Snapshot Report) designs, manufactures and markets sport boats primarily in the United States and is a stock from the leisure and recreational products industry. Malibu Boats has a Zacks Rank #2. All the brokers covering the stock rate it as a Strong Buy. Over the trailing four quarters, the company has an average positive earnings surprise of 0.25%. Its earnings growth is expected to be 20% over the long term.

Based in Santa Monica, CA, Activision Blizzard, Inc. (ATVI - Snapshot Report) develops and publishes online, personal computer (PC), video game console, handheld, mobile, and tablet games worldwide. Over the trailing four quarters, the company recorded a massive average positive earnings surprise of 246.53%. The brokers covering this Zacks Rank #2 stock rate it as a Modest Buy. Its earnings growth is expected to be 7.5% over the long term. This stock is a part of the Toys/Game/Hobby Industry.

Based in Las Vegas, NV, Diamond Resorts International, Inc. (DRII - Snapshot Report) operates in the hospitality and vacation ownership industry. The company has an average four-quarter positive earnings surprise of 20.89%. All the brokers covering this Zacks Rank #2 stock recommend it as a Modest Buy.

Bottom Line

Stabilizing energy costs, rising consumer confidence, encouraging economic conditions and improving employment trends indicate faster economic growth in 2015. It is generally believed that the U.S. economy should do better in 2015 compared to the past year.

However, despite moderate improvement in economic growth, consumers are increasing their spending only modestly as an increase in jobs this year is yet to translate into significantly higher wages.

The above mentioned stock picks are expected to be good bets given their ranks, past performance and brokers’ confidence in them.