Consumer Confidence in the USA Reaches New High — Positive Outlook for Discretionary Securities

Consumer confidence in the United States made a remarkable leap in October, reaching its highest level in nine months. This upward trend is supported by a significant interest rate cut by the US Federal Reserve in the previous month, as well as the expectation of further rate cuts, positively influencing economic sentiment. The rise in confidence levels could further boost strategic investments in so-called discretionary stocks such as American Outdoor Brands, Crocs, Norwegian Cruise Line Holdings, Netflix, and Mattel. According to Zacks, these securities are currently ranked #1 (Strong Buy) or #2 (Buy) and promise attractive return potentials. The current Conference Board Consumer Confidence Index increased to 108.7 points in October, from 99.2 in the previous month, marking the best value since the beginning of the year. The present situation index, reflecting consumers' assessment of current business and labor conditions, rose by 14.2 points to 138 points. Additionally, the expectations index, which reflects short-term income and labor market expectations, climbed to 89.1 points, surpassing the critical threshold of 80 points. Interestingly, consumer confidence achieved this rise despite the labor market showing signs of cooling. In September, the U.S. Department of Labor reported a drop in job openings to their lowest level in three and a half years. Nevertheless, the perception of the job situation improved in the Conference Board's October survey, contributing to the increased consumer confidence. Despite previous concerns regarding a slightly increased inflation level in September, the expectation remains that inflation will continue to reach the Fed's 2% target. If inflation figures indeed decline, the Federal Reserve will consider further rate cuts. The CME FedWatch currently shows a 98.9% probability of a 25 basis point rate cut in November and a 76.6% probability of a 20 basis point reduction in December.