The confidence level among Americans reached an all-time high in April, suggesting strong economic growth in the coming period…With rising consumer confidence it is expected that consumer discretionary ETFs will perform well. Investors who intend to benefit from this sector should focus on the ETFs mentioned below.
The original article has been edited here for length (…) and clarity ([ ]). For the latest – and most informative – financial articles sign up (in the top right corner) for your FREE tri-weekly Market Intelligence Report newsletter (see sample here)
Why Confidence is On Rise
…As per a survey by JPMorgan, conducted on 1685 executives:
- 64% of entrepreneurs were willing to increase full-time employees and
- 76% talked about increasing compensation
so hiring in the second quarter is expected to rise, along with consumer spending.
- The corporate sector is also looking to increase profits with lower tax and a developed start-up ecosystem generating new business models along with revenues.
- The real estate prices have increased due to shortage of available homes for sale.
- Consumer spending, however, has been tight with automobiles, appliances and houses saw decline in sales volume.
Investors who intend to benefit from the consumer discretionary spending sector should focus on the following 5 ETFs:
1. Consumer Discretionary Select Sector SPDR Fund (XLY)
The fund seeks to provide investment results and performance of the Consumer Discretionary Select Sector Index. It has 81 stocks in its basket and has an AUM of $133 billion…Amazon, Home Depot and Netflix are the top individual holdings with 21.9%, 7.3% and 5.2% respectively. The average daily volume of shares traded stands at 6.04 million. It has a nominal expense ratio of 13 basis points a year and a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook
2. Vanguard Consumer Discretionary ETF (VCR)
The fund tracks the performance of the US Investable Market Consumer Discretionary 25/50 Transition Index which measures the investment return of stocks in the consumer discretionary sector. The fund has amassed $2.75 billion of assets under its portfolio and comprises 367 holdings…It has a daily trading volume of 99,470 shares and an expense ratio of 0.10%. The fund has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Consumer Discretionary ETFs Head to Head: XLY vs. VCR).
3. iShares US Consumer Services ETF (IYC)
The fund seeks investment results of the Dow Jones U.S. Consumer Services Index which has exposure to U.S. companies distributing food, drugs, retail items and media. It has an AUM of $775 million and trades in a daily volume of 35,000 shares. Amazon, Home Depot and Netflix are the top three stocks with 18.6%, 6% and 4.5% allotment respectively…IYC consists of 160 holdings in its basket and has moderate expense ratio of 0.44%. The fund has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
4. Fidelity MSCI Consumer Discretionary Index ETF (FDIS)
The fund tracks the results of MSCI USA IMI Consumer Discretionary Index by investing no less than 80% of assets in securities included in the index. It has 343 holdings in its basket among which Amazon, Home Depot and Netflix comprise the top three with 18%, 6% and 4.2% allocations, respectively. The fund has an asset base of $567.8 million in its portfolio…Average daily traded volume of shares is 140,000. The fund charges an annual fee of 8 basis points and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
5. First Trust Consumer Discretionary AlphaDEX Fund (FXD)
The fund tracks the investment results of the StrataQuant Consumer Discretionary Index. It has high annual fees of 63 basis points and comprises 114 holdings. Also, the fund has $408.3 million in its asset base with daily traded volume of 103,700 shares. As for individual holdings Netflix, Lululemon Athletica and Amazon are the top three with none holding more than 2%…The fund has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.