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US Consumer Confidence Stays Stable in May: ETFs in Spotlight

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The latest U.S. consumer confidence data looks decent as the metric has remained steady in May after registering gains in April. The Conference Board's measure of consumer confidence index stands at 117.2 for May, mostly flat in comparison with April’s reading of 117.5. Moreover, May’s reading missed the consensus estimate of 119.2, per a Reuters’ poll.

The Present Situation Index, which gauges consumer views on current business and labor market conditions, rose to 144.3 in May from 131.9 in April, signaling strong economic growth in the second quarter of 2021. Meanwhile, the Expectations Index, which is a measure of consumers’ short-term (for the next six months) outlook for income, business and labor market conditions, declined to 99.1 in May from April’s 107.9. Consumers are probably expecting slowing growth and weakening labor market conditions in the coming months. They also seem to be worried about the rising inflation levels and decreasing fiscal stimulus support.

Moreover, the survey’s labor market differential, calculated from data on respondents’ views on whether sufficient jobs are available or difficult to get, surged to a reading of 34.6 in May from 21.6 in April, per a Reuters article. Markedly, concerns over rising inflation levels may keep a check on consumer spending, at least in the near term.

In this regard, Lynn Franco, Senior Director of Economic Indicators at The Conference Board, reportedly said, “Overall, consumers remain optimistic, and confidence should remain resilient in the short term, as vaccination rates climb, COVID-19 cases decline further, and the economy fully reopens."

Factors Instilling Optimism

The U.S. economy seems to be strongly rebounding from the coronavirus led-slowdown. Several factors like reopening of the U.S. economy, accelerated coronavirus vaccine rollout and solid fiscal support are supporting the upside.

Going by data compiled by Johns Hopkins University, the seven-day average of new infections was about 26,000 as of May 23, per a CNBC article. Encouragingly, the number of cases has dropped to the lowest level since June 2020. Accelerated coronavirus vaccine rollout has been the major factor that has helped gain control over the aggravating outbreak.

President Joe Biden recently announced his latest vaccination goals. He aims at administering at least one dose of a coronavirus vaccine to 70% of U.S. adults along with getting 160 million adults completely vaccinated by Jul 4, per a CNBC article.

Notably, around 39% of the Americans are completely vaccinated as of May 22, per data from the Centers for Disease Control and Prevention (CDC) (as mentioned in a CNBC article). The same article also mentions that around 49% of the U.S. population has received at least one dose of the coronavirus vaccine. Going on, 61% of the Americans are at least partially vaccinated among the age group of 18 years and older, per the CDC data.

Furthermore, the latest public health guidelines issued by the CDC have relaxed restrictions on wearing masks at indoor and public gatherings. According to the new recommendations, completely vaccinated people do not need to wear masks or stay six feet away from others at indoor or outdoor gatherings, per a CNBC article.

Additionally, the Fed’s continued dovish stance is increasing chances of speedy U.S. economic growth recovery from the coronavirus-induced sluggishness. The central bank decided to maintain rates at near-zero level until 2023, at least. Moreover, the Fed raised its economic growth outlook considering the vaccine and stimulus optimism and expectations of an uptick in inflation this year.

ETFs That Might Gain

The moderate improvement in consumer confidence is likely to boost the consumer discretionary sector, which attracts a major portion of consumer spending. Also, the space comprises businesses that sell goods and services, which are considered non-essential by consumers. Markedly, the sector is likely to be a major gainer as the U.S. economy gradually returns to the pre-pandemic level as more parts of it reopen.

Below, we have highlighted the four most popular ones that target the broader consumer discretionary sector (see all Consumer Discretionary ETFs):

The Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)

This is the largest and most popular product in the consumer discretionary space, with AUM of $20.14 billion. It tracks the Consumer Discretionary Select Sector Index. The fund charges 12 basis points (bps) in fees per year and carries a Zacks ETF Rank #2 (Buy), with a Medium-risk outlook (read: 5 Top-Ranked ETFs to Ride on a Booming Economy).

Vanguard Consumer Discretionary ETF (VCR - Free Report)

This fund currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Index. VCR charges investors 10 bps in annual fees. The product has managed $6.10 billion in its asset base and carries a Zacks ETF Rank #2, with a Medium-risk outlook (read: Will ETFs Gain on Starbucks' Q2 Earnings Beat Amid Pandemic?).

First Trust Consumer Discretionary AlphaDEX Fund (FXD - Free Report)

This fund tracks the StrataQuant Consumer Discretionary Index, which employs the AlphaDEX stock-selection methodology to select stocks from the Russell 1000 Index. FXD has AUM of $1.88 billion. It charges 63 bps in annual fees and has a Zacks ETF Rank #3 (Hold), with a Medium-risk outlook.

Fidelity MSCI Consumer Discretionary Index ETF (FDIS - Free Report)

This fund tracks the MSCI USA IMI Consumer Discretionary Index. The product has amassed $1.63 billion in its asset base. It charges 8 bps in annual fees from investors and carries a Zacks ETF Rank #2, with a Medium-risk outlook (read: Bet on These 5 Top-Ranked ETFs to Boost Portfolio Returns).

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