On Wednesday, President Trump’s chief advisor on economic issues, Larry Kudlow, provided a bullish view of the U.S. economy. Kudlow also indicated that further tax cuts are on the anvil. Kudlow’s comments were in keeping with Fed Chair Jerome Powell’s encouraging assessment of the economy which he provided in his testimony to Congress.
Powell and Kudlow’s views were supported by the Fed’s latest Beige Book report which revealed that the economy is growing moderately. These bullish assessments indicate that consumption expenditure, considered to be engine of U.S. growth, will remain firm in the near future. Investing in consumer discretionary stocks looks like a good option at this time.
Kudlow Predicts Higher Growth, Hints at Tax Cuts
Speaking at CNBC's Delivering Alpha conference in New York, Larry Kudlow provided an encouraging view of the economy. Trump’s top economic advisor told CNBC’s Jim Cramer that growth was already at 3% and could hit “4(%) for a quarter or two.” Pointing to the robust state of the jobs market, Kudlow said “millions more people are working.”
When asked if the Trump administration is considering further changes to tax laws, Kudlow hinted that there was more to come on this front. He stated that a “2.0 and 3.0 and a 4.0” version of recent tax cuts was extremely likely. His view that economic growth could hit 4% is widely shared by economists, who think that second-quarter growth has likely neared that pace.
Powell Provides Buoyant View, Beige Book Affirms Comments
On Tuesday, Fed Chair Jerome Powell made several bullish remarks about the economy during his testimony to Congress. Powell predicted that that the United States is on the verge of “several years” of low inflation and robust job gains.
Powell expects the broader economy to grow at a faster pace than the U.S. central bank currently anticipates. He added that “rising after-tax incomes and optimism among households have lifted consumer spending in recent months.” (Read: 5 Best Stocks to Buy on Powell Testimony)
Powell and Kudlow’s comments have been supported by the Fed’s latest Beige Book report. The survey of business conditions across 12 Federal Districts revealed that 11 of these had experienced a modest or even faster pace of growth. Both employment and wage increases were also increasing at a modest to moderate pace.
Kudlow’s views on the state of the U.S. economy have been echoed by a wide swathe of economists. In particular, his prediction of 4% growth likely came true in the second quarter itself. Jerome Powell has also recently made optimistic comments about the economy. His views have been supported by the Fed’s latest Beige Book report.
Consumption expenditure, which is acknowledged as the engine which powers the economy, is also likely to pick up during this period. Investing in consumer discretionary stocks looks like a smart option at this point. However, picking winning stocks may be difficult.
This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.
We have narrowed down our search to the following stocks, each of which has a Zacks Rank #1 (Strong Buy) and a good VGM Score. You can see the complete list of today’s Zacks #1 Rank stocks here.
American Woodmark Corporation AMWD is a manufacturer and distributor of kitchen and bath cabinets.
American Woodmark has a VGM Score of A. The company has expected earnings growth of 43.8% for the current year. The Zacks Consensus Estimate for the current year has improved by 25.5% over the last 60 days.
Malibu Boats, Inc. MBUU operates as a designer, manufacturer and marketer of sport boats primarily in the United States.
Malibu Boats has a VGM Score of A. The company has expected earnings growth of 16.6% for the current year. The Zacks Consensus Estimate for the current year has improved by 1.7% over the last 60 days.
Johnson Outdoors Inc. JOUT is a designer, manufacturer and marketer of outdoor equipment, watercraft, diving and marine electronics products.
Johnson Outdoors has a VGM Score of B. The company’s projected growth rate for the current year is 31.5%. The Zacks Consensus Estimate for the current year has improved by 2.2% over the last 30 days.
Weight Watchers International, Inc. WTW is the largest provider of weight control programs in the world.
Weight Watchers has a VGM Score of B. The company’s expected earnings growth for the current year is 76.6%. The Zacks Consensus Estimate for the current year has improved by 0.7% over the last 30 days.
Penn National Gaming, Inc. PENN is a leading, multi-jurisdictional owner and manager of gaming and racing facilities with video gaming terminal operations, and a focus on slot machine entertainment.
Penn National has a VGM Score of B. The Zacks Consensus Estimate for the current year has improved by 4.6% over the last 30 days.
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