As markets rally on renewed trade-talk optimism, investors are turning bullish with a rising risk appetite. The S&P 500 Consumer Discretionary Index has increased 20.14% over the past year and 10.78% quarter to date, outperforming the S&P 500 Index. The broad market index has gained 12.65% and 7.61% over the past year and quarter to date, respectively.

Lower likelihood of a recession, improved consumer sentiment and progressing trade talks between Washington-Beijing are fueling the consumer discretionary sector’s momentum.

Business Leaders More Optimistic as Recession Fears Fade

According to CNBC, recession concerns among business leaders are easing. Per the data, just under 30% of CEOs now expect a mild or severe recession in the next six months, down from 46% in May and 62% in April.

Optimism is also rising in the economy, with more than 40% of the surveyed CEOs now expecting some level of economic growth in the United States, nearly double the 23% who felt the same in April. This reflects a notable shift in sentiment among corporate leaders, signaling growing confidence in the resilience of the U.S. economy.

Consumer Optimism and Trade-Talks Lift Markets

Per a survey by New York Federal Reserve, as quoted on CNBC, easing inflation worries among average consumers following President Trump’s decision to roll back some of his more aggressive trade measures is helping the cyclical sectors.

According to a survey by the Conference Board, the Consumer Confidence Index jumped to 98.0 in May, marking a 12.3-point increase from April, giving consumer sentiment a much-needed boost. According to CNBC, driven by progressing trade talks between Wahington and Beijing, investors are turning bullish, with 44% anticipating higher stock prices in the next 12 months, up from 37.6% in April.

Markets traded higher after China and the United States announced that they had agreed on a framework to build on the trade truce reached in Geneva last month, according to Yahoo Finance.

ETFs to Consider

The rally in consumer discretionary funds highlight rising optimism about the economy and expectations for stronger consumer spending. Consumer discretionary funds have performed comparatively better than the SPDR S&P 500 ETF (SPY Quick QuoteSPY - Free Report) , which has gained 6.28% over the past month and 13.41% over the past year.

Below, we highlight a few consumer discretionary funds for investors to consider.

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

Consumer Discretionary Select Sector SPDR Fund seeks to track the performance of the Consumer Discretionary Select Sector Index with a basket of 51 securities. The fund has amassed an asset base of $21.52 billion and charges an annual fee of 0.08%.

The fund has double-digit exposure to Amazon (AMZN Quick QuoteAMZN - Free Report) and Tesla (TSLA Quick QuoteTSLA - Free Report) , with 23.17% and 16.17%, respectively. XLY has about 97.97% of its assets allocated to large-cap securities and has a weighted alpha of 18.42.

Consumer Discretionary Select Sector SPDR Fund has gained 8.48% over the past month and 22.74% over the past year.

Vanguard Consumer Discretionary ETF (VCR Quick QuoteVCR - Free Report)

Vanguard Consumer Discretionary ETF seeks to track the performance of the MSCI US Investable Market Consumer Discretionary 25/50 Index with a basket of 292 securities. The fund has amassed an asset base of $5.78 billion and charges an annual fee of 0.09%.

The fund has double-digit exposure to AMZN and TSLA, with 22.54% and 14.30%, respectively. VCR has about 62.5% of its assets allocated to large-cap securities and has a weighted alpha of 15.49.

Vanguard Consumer Discretionary ETF has gained 9.35% over the past month and 17.87% over the past year.

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

Fidelity MSCI Consumer Discretionary Index ETF seeks to track the performance of the MSCI USA IMI Consumer Discretionary 25/50 Index with a basket of 262 securities. The fund has amassed an asset base of $1.75 billion and charges an annual fee of 0.08%.

The fund has double-digit exposure to AMZN and TSLA, with 22.89% and 16.06%, respectively. FDIS has about 66.95% of its assets allocated to large-cap securities and has a weighted alpha of 15.6.

Fidelity MSCI Consumer Discretionary Index ETF has gained 9.30% over the past month and 17.92% over the past year.

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

First Trust Consumer Discretionary AlphaDEX Fund seeks to track the performance of the StrataQuant Consumer Discretionary Index with a basket of 122 securities. The fund has amassed an asset base of $327.5 million and charges an annual fee of 0.61%.

The fund has the top allocation to Carvana (CVNA Quick QuoteCVNA - Free Report) , with a share of 2.04%, indicating that it has less concentration risk. FXD has about 52.34% of its assets allocated to large-cap securities and has a weighted alpha of 5.23.

First Trust Consumer Discretionary AlphaDEX Fund has gained 8.64% over the past month and 1.96% over the past year.

Invesco S&P 500 Equal Weight Consumer Discretionary ETF (RSPD Quick QuoteRSPD - Free Report)

Invesco S&P 500 Equal Weight Consumer Discretionary ETF seeks to track the performance of the S&P 500 Equal Weight Consumer Discretionary Index with a basket of 53 securities. The fund has amassed an asset base of $207.6 million and charges an annual fee of 0.40%.

The fund’s top allocation to Ulta Beauty (ULTA Quick QuoteULTA - Free Report) , with a share of 2.72%, indicates that it has less concentration risk. RSPD has about 83.57% of its assets allocated to large-cap securities and has a weighted alpha of 9.37.

Invesco S&P 500 Equal Weight Consumer Discretionary ETF has gained 5.76% over the past month and 8.23% over the past year.