The U.S. economy has been on a solid growth path since spring. This is especially true given that U.S. GDP growth expanded 3% annually in the third quarter following 3.1% growth in the second quarter. This represents the best back-to-back quarters of at least 3% growth since 2014.
The growth was driven by increase in consumer spending, inventory investment and business investment amid two devastating hurricanes Harvey and Irma that dampened activities across Houston area in late August and Florida in early September.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 2.4% in the third quarter thanks to solid auto sales boosted by surging demand to replace vehicles damaged by the hurricances. A strong job market, cheap fuel and low household debt are leading to the wealth effect and in turn more spending power. Meanwhile, business spending on equipment increased 8.3%. This shows that companies are optimistic about demand in the United States as well as overseas.
The solid trend is likely to continue with many experts projecting growth of 3% in the fourth quarter as well due to the ongoing hurricane-related rebound, unemployment at a low rate of 4.2%, and hopes of Congress passing Trump’s tax reform proposal by the end of the year.
Moreover, consumers have become highly optimistic about the economy. This is especially true as consumer sentiment soared to the highest level since the start of 2004. The consumer sentiment index, as indicated by University of Michigan survey, hit 100.7 in October, up from 95.1 in September. This is the second time when the index crossed the 100 mark since the record 1990s expansion following the 103.8 rise in January 2004. Rising consumer sentiment will no doubt increase spending power and is thus expected to have a positive impact on the overall economic growth picture.
While most of the ETFs will likely to benefit following strong Q3 GDP and consumer sentiment, we have highlighted the five funds that are expected to outperform in the days ahead and have a solid Zacks ETF Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold).