For investors seeking momentum, Consumer Discretionary Select Sector SPDR ETF (XLY Quick QuoteXLY - Free Report) is probably on the radar. The fund just hit a 52-week high and is up 44.33% from its 52-week low price of $166.48/share.

But are more gains in store for this ETF? Let’s take a quick look at the fund and the near-term outlook on it to get a better idea of where it might be headed:

XLY in Focus

The underlying Consumer Discretionary Select Sector Index seeks to provide an effective representation of the consumer discretionary sector of the S&P 500 Index. The product charges 9 bps in annual fees (See: All Consumer Discretionary ETFs).

Why the Move?

The consumer discretionary corner of the broad stock market has been an area to watch lately, given the dovish stance of the Fed and interest rate cuts in 2024. Market expectations of further interest rates cut in 2025 is another tailwind for the sector. Low rates reduce the cost of borrowing, making interest rate sensitive sectors like consumer discretionary appealing investment options.

Increased optimism during the holiday season signals a positive boost for consumer confidence. Several factors, such as a continuous surge in the technology sector, also boost the sector’s prospects.    

More Gains Ahead?

Currently, XLY has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. However, it might continue its strong performance in the near term, with a positive weighted alpha of 34.4 (as per Barchart.com), which gives cues of a further rally.