When people feel more confident about their budgets, they hit the road Leisure stocks are likely to outperform this year as emboldened consumers kick back and relax. Here’s more on three economic trends supporting this trend and 11 stocks to consider, according to five money managers I check in with on this theme. 

Three trends will give consumers more confidence to spend on leisure this year:

1. Consumer sentiment is surging. The University of Michigan consumer sentiment index added almost 10 points to 79 in January. Sentiment rose on improved outlooks for inflation and income. Consumer sentiment has surged 29% since November. That’s the biggest two-month increase since 1991.

2. Jobs are plentiful: Nonfarm payroll employment increased by 353,000 in January, and the count for the prior two months was revised upwards. Average hourly earnings rose by 4.5% over the prior year. The January jobs increase is even more impressive because payroll numbers typically shrink that month due to post-holiday layoffs, says Bank of America. The data confirm there is no recession on the horizon. Plentiful jobs and wage hikes make consumers more confident about leisure spending. 

3. We’re in the midst of a productivity boom: Productivity growth was a robust 3.2% in the fourth quarter of 2023, following 4.9% and 3.5% gains in the prior two quarters. For perspective, growth has rarely come in above 4% over the past 20 years. Productivity growth supports pay hikes, and it reduces pressure on companies to raise prices. Both improve spending power. The boom also boosts economic growth. GDP growth is driven by a combination of labor force and productivity growth — both of which we have right now. 

Here are 11 leisure stocks that will benefit from these trends: 

Travel When people feel more confident about their budgets, they hit the road. And there is still pent-up demand for travel post-Covid, says George Young, a portfolio manager with Villere & Co. in New Orleans. This is one reason his portfolio owns casino and hotel company Caesars Entertainment CZR, -1.17%. The stock may also benefit from continued efforts to reduce its high debt levels. 

Matt Wittmer and Abby Roach at Allspring Global Investments favor Hilton Worldwide Holdings HLT, +0.27% as a play on leisure travel spending. It’s also one of the major builders of hotels at a time when there’s a shortage of rooms. Hilton accounts for one in five rooms under construction, more than any other chain, Roach says. Meanwhile, independent operators continue to convert to the Hilton brand because it boosts business. 

Next, consider airlines like Ryanair Holdings RYAAY, -1.53% in Europe. The continent is in an economic slump, which hurts air travel. But it actually helps Ryanair. Since it has lower costs and a stronger balance sheet than competitors, Ryanair takes market share from struggling competitors in downturns, says Andrew Brown at Baillie Gifford, who specializes in finding companies that find ways to win throughout the economic cycle. The airline is still profitable even during this slump, and it is using profits to buy more landing slots at airports. The European economy may provide a tailwind this year as the central bank there eased monetary conditions, predicts Ed Yardeni, of Yardeni Research.  

Also, consider two behind-the-scenes names in travel. Brown at Baillie Gifford singles out Amadeus IT Group AMADY, +0.31% which provides software that runs booking systems for airlines and hotels, and in-house media systems at hospitality chains. Young, at Villere & Co., owns Euronet Worldwide EEFT, -0.58%, which has more than 50,000 ATMs in Europe, the Middle East, Asia and the U.S. That makes it a travel play.