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Consumer Confidence Soars to 18-Year High: 5 ETFs to Buy

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U.S. consumer confidence soared to an 18-year high in September. Households seem to be pretty confident about the labor market and robust economy in spite of escalating trade war tensions between the United States and China. This is welcome news for retailers, especially as the holiday season is about to kick-off (see: all Consumer Discretionary ETFs).

The Consumer Confidence index increased to 138.4 from 134.7 in August per the Conference Board. “These historically high confidence levels should continue to support healthy consumer spending, and should be welcome news for retailers as they begin gearing up for the holiday season,” said Lynn Franco, the Conference Board’s director of economic indicators.

This survey measures the sentiments with regard to present economic conditions and what is to follow in the next six months. It is near an all-time high of 144.7, reached in 2000.

It seems that the consumers are shrugging off trade tensions as the short-term outlook for businesses improved this month. Notably, 27.6% of consumers expect business conditions to improve over the next six months, up from 24.4% in August. People with a negative stance slashed the view from previous month’s 9.9% to 8% (See: ETFs to Tap Amazon's Growth and Expansion Story).

The economy has expanded at a rate of 4.2% in the April-June quarter, higher than the previous estimate of 4.1%. The current employment rate of 3.9% is at nearly a two-decade low as the U.S. economy has been able to add jobs for 95 successive months, the longest stretch in record. Labor market expectations improved in September as 22.5% of consumers expect more job opportunities in the following months, up from 21.5% in the previous month.

“Knowing that the job market is strong, knowing that one has a regular paycheck does wonders for confidence,” said Jennifer Lee, senior economist at BMO Capital Markets.

An alternative measure of economic growth, Gross Domestic Income (GDI) increased at 1.8% annualized rate in the second quarter. The average of GDP and GDI also referred to as Gross Domestic Output grew at a promising rate of 3% in the April-June quarter.

However, the housing market lags the broader economy due to higher housing prices and mortgage rates (see: Renting Preferred Over Buying: Industrial ETFs in Focus).

These numbers show how the consumers would be spending their money which account for nearly two-third of the U.S. economy. Lynn Franco, director of economic indicators at the Conference Board, added that “these historically high confidence levels should continue to support healthy consumer spending, and should be welcome news for retailers as they begin gearing up for the holiday season.”

Rising consumer confidence is expected to have a positive impact on the consumer discretionary sector as it attracts a large chunk of spending.  The investors could tap this encouraging trend with the following consumer discretionary ETFs performing strongly year to date:

Amplify Online Retail ETF (IBUY - Free Report) Up 27.4% YTD

It tracks the EQM Online Retail Index. There are 39 holdings in the fund pool and the top weight is held by Carvana Co. (CVNA - Free Report) with 7.13%. AUM is $553.5 million and the expense ratio is 0.65%.

VanEck Vectors Retail ETF (RTH - Free Report) Up 21.7% YTD

It tracks the MVIS US Listed Retail 25 Index. There are 25 holdings in the fund pool and Amazon (AMZN - Free Report) is the top weight holder with 21.46%. AUM is $129.6 million and expense ratio is 0.35%.

Invesco DWA Consumer Cyclicals Momentum ETF (PEZ - Free Report) Up 19.6% YTD

It tracks the Dynamic Consumer Discretionary Sector Intellidex Index. There are 40 holdings in the fund pool, with Amazon (5.97%) at the top spot. AUM is $77.4 million and expense ratio is 0.60%.

Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) Up 19.5% YTD

It tracks the Consumer Discretionary Select Sector Index. There are 65 holdings in the basket of fund and Amazon sits at the top with 23.02% allocation. AUM is $16.1 billion and expense ratio is 0.13%.

iShares US Consumer Services ETF (IYC - Free Report) Up 18.2% YTD

It tracks the Dow Jones U.S. Consumer Services Index. It comprises 168 holdings and Amazon is at the top, with a weight of 21.6%. AUM is $968.5 million and the expense ratio is 0.43%.

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