The coronavirus pandemic seems to be under control in the United States amid accelerated coronavirus vaccine rollout programs and booster shots. The current market situation is making the consumer discretionary sector a bright investment space with great prospects.
Moreover, the U.S. economy seems to be steadily recovering from the outbreak-led slowdown, as some recently-released economic data highlight the same. The U.S. jobs report for November looks very impressive. The nonfarm payrolls rose by 531,000 in October, surpassing the estimate of 450,000, per a CNBC article. Also, beating expectations, the unemployment rate declined to 4.6%, hitting a new pandemic low level (according to a CNBC article).
Wall Street has another reason to cheer as the U.S. House of Representatives has passed the more than $1-trillion infrastructure bill on Nov 5. The bill has now moved to President Biden for his signature. The legislation was approved in a 228-206 vote, per a CNBC article.
Going on, consumer confidence in the United States rose in October primarily on the heels of easing Delta variant concerns, improving labor market conditions, rebounding U.S. economy from the pandemic-led slump and accelerated coronavirus vaccine rollouts. The Conference Board's measure of consumer confidence index stands at 113.8 in comparison to 109.8 in September. The metric has finally broken the streak of three consecutive monthly declines. October’s reading also beat the consensus estimate of the metric, coming in at 108.3, per a Reuters’ poll. The metric continues to be below the pre-pandemic level of 132.6 in February 2020.
Consumers seem to be looking to buy homes, motor vehicles and major household durables. In fact, the buying attitude for vehicles and homes is expanding. The survey also showed that the proportion of the population planning to go on vacation has shot up to the highest level since February 2020, as mentioned in a Reuters article.
Heading into the holiday season, given the reopening of domestic and international borders for traveling, we are enthusiastic about the consumer discretionary sector. The United States aims to remove travel restrictions and reopen to completely vaccinated international travelers. The news boosted enthusiasm for economic and travel recovery. In fact, airlines recently hinted at a solid travel trend.
The impressive third-quarter earnings results have been keeping investors busy. The earnings results have also eased investors' worries surrounding the rising supply-chain disturbances eroding corporate profit margins.
ETFs to Consider
Along with the favorable factors mentioned above, the moderate improvement in consumer sentiment is likely to boost the consumer discretionary sector. 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 Quick Quote XLY - Free Report)
This is the largest and most popular product in the consumer discretionary space, with AUM of $23.90 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:
Fed to Start QE Taper: Is It Time for Cyclical Sector ETFs?). Vanguard Consumer Discretionary ETF ( VCR Quick Quote 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 $7.62 billion in its asset base and carries a Zacks ETF Rank #1 (Strong Buy), with a Medium-risk outlook (read:
4 Sector ETFs & Stocks for Bountiful Returns in November). First Trust Consumer Discretionary AlphaDEX Fund ( FXD Quick Quote FXD - Free Report)
This fund tracks the StrataQuant Consumer Discretionary Index, employing the AlphaDEX stock-selection methodology to select stocks from the Russell 1000 Index. FXD has AUM of $2.01 billion. It charges 63 bps in annual fees and has a Zacks ETF Rank #3 (Hold), with a Medium-risk outlook (read:
ETFs to Gain as US Consumer Confidence Rises in October). Fidelity MSCI Consumer Discretionary Index ETF ( FDIS Quick Quote FDIS - Free Report)
This fund tracks the MSCI USA IMI Consumer Discretionary Index. The product has amassed $1.82 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:
How Are ETFs Reacting to Starbucks' Q4 Earnings Results?).