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.

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