On Mar 27, the Conference Board reported U.S. consumer confidence data for the month of March. In February, consumer confidence index was at its 18-years high. Although the data shows a moderate dip from the previous month, primarily due to stock market fluctuations, it still remains at a strong level.

The expected improvement in income, jobs and after-tax pay of U.S. consumers are most likely to offset worries about rising interest rates and stock market volatility. A robust job market, massive tax cuts and solid economic data are likely to increase consumer spending in the months to come. At this stage, investment in consumer discretionary stocks with a favorable Zacks Rank will be a prudent move.

Moderate Dip in March Data

For March 2018, the Conference Board's measure of consumer confidence index stands at 127.7 compared with 130.0 in February, which was the highest in 18 years. March’s reading also came in below the consensus estimate of 130.4. The Present Situation index plummeted from 161.2 to 159.9, while the Expectations index dropped from 109.2 last month to 106.2 this month.

Persistence of volatility in the stock market, expectation of a global trade war followedby President Trump’s Tariff policies and anticipation of an aggressive interest rate hike by the Fed led to the marginal decline in the consumer confidence index.

However, March’s reading of 127.7 was the second highest since the November 2017 index of 128.6. Notably, the reading for March 2017 was just 124.9.

U.S. Economy on Strong Footing

Recession is unlikely to occur as the U.S. economic fundamentals remain healthy. Several important macro-economic reports released in this month indicate as much.

U.S. economy added 313,000 jobs in February 2018, exceeding the consensus estimate of 208,000. Moreover, the total labor force stands slightly below 162 million. This was the highest since September 2003.

The Department of Commerce’s data showed that new orders for durable goods increased 3.1% in February after declining for two straight months. Orders for non-defense capital goods, excluding aircraft, grew 1.8%, reflecting biggest gain in five months. Core capital goods shipments increased 1.4%, the largest increase experienced since December 2016.

Industrial production improved 1.1% in February as against a dip of 0.3% in January. Manufacturing production increased 1.2% in February, reflecting largest gain since October 2017. Total industrial production in February was 108.2%, up 4.4% year over year.

Finally, on Mar 21, the Fed raised the economic outlook for 2018 from 2.5% to 2.7% and provided robust estimates of several key economic metrics post the Federal Open Market Committee’s latest policy meeting.

How to Identify the Potential Winners?

Consumer spending accounts for about 70% of U.S. economic activity.Strong consumer confidence data indicates that the space is likely to witness robust growth in the coming months. Consequently, adding consumer discretionary stocks to your portfolio makes sense at this point. However, picking winning stocks can be a difficult task.

This is where our VGM Score comes in handy. 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 the 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.

Shuffle Your Portfolio: 4 Key Picks

The chart below shows the price performance of our four picks in last six months.

Rocky Brands Inc. (RCKY - Free Report) is a leading designer, manufacturer and marketer of premium quality footwear and apparel marketed under brand names Rocky Outdoor Gear, Georgia Boot, Durango, Lehigh, and the licensed brand, Dickies.

Rocky Brands has a VGM Score of A. It has expected earnings growth of 20.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 19.7% over the last 60 days.

Guess? Inc. (GES - Free Report) designs, markets, distributes and licenses one of the world's leading lifestyle collections of contemporary apparel and accessories.

Guess has a VGM Score of A. It has expected earnings growth of 37.1% for the current year. The Zacks Consensus Estimate for the current year has improved by 14.3% over the last 60 days.

Discovery Communications Inc. (DISCA - Free Report) is the world's top-ranked non-fiction media company reaching more than 1.8 billion cumulative subscribers in 209 countries and territories.

Discovery has a VGM Score of A. It has expected earnings growth of 17.9% for the current year. The Zacks Consensus Estimate for the current year has improved by 14% over the last 60 days.

MCBC Holdings Inc. (MCFT - Free Report) is a designer, manufacturer and marketer of MasterCraft brand premium performance sport boats.

MCBC Holdings has a VGM Score of B. The company has expected earnings growth of 40.8% for the current year. The Zacks Consensus Estimate for the current year has improved by 13.7% over the last 60 days.