US Consumer Sentiment Nears 14-Year High: 5 Top-Ranked Picks

American consumers took an increasingly optimistic view of the economy in September, per a preliminary reading of consumer sentiment. The University of Michigan consumer sentiment index increased to a six-month high, nearing a 14-year peak and beating most estimates. A more favorable outlook for jobs and income was the primary catalyst for the month’s gains.

At this moment, the biggest worry for consumers seems to be the negative fallout from tariffs. But such fears are being largely ignored for the moment, as evident from last week’s bullishness on the bourses. Other economic indicators also support the optimism. This is why it is still a good time to invest in consumer discretionary stocks.

Optimism About Jobs, Income Boosts Index

According to the University of Michigan's Surveys of Consumers, sentiment increased from 96.2 in August to 100.8 in September. This is significantly higher than the estimated level of 96.6 generated by a Thomson Reuters survey. It is also the second-highest reading registered since 2004.

The gauge of current economic conditions increased from 110.3 to 116.1. Also, increasingly favorable prospects for jobs and incomes boosted the index of consumer expectations from 87.1 to 91.1, its highest level since July 2004.

According to Richard Curtin, the chief economists of the survey, the jump in consumer sentiment was “largely due to more favorable prospects for jobs and incomes.” Curtin added that consumers currently believe that steady economic growth “would produce more jobs and an even lower unemployment rate during the year ahead.”

Tariff Worries Continue to Weigh on Consumers

According to economists at Oxford Economics, the biggest worry for consumers “continues to be the anticipated negative effects from trade policy”. The report echoed this view, stating that fears of the detrimental impact of the tariffs on the domestic economy were cited by “nearly one-third of all consumers in the past three months, up from one-in-five in the prior four months.”

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