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Consumer Confidence at 18-Year High: 5 ETFs to Buy
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Consumer confidence reached an 18-year high as consumers portrayed positive sentiments toward economic outlook. These numbers suggest that growth would continue in the time to come and is a good sign for the upcoming holiday season (see: all the Consumer Discretionary ETFs).
Per the Conference Board, the reading increased to 137.9 in October, up from a downwardly revised 135.3 in September. Poll conducted by Reuters indicated that the index would slip to 136 from the previously reported 138.4 (read: Amazon Slumps Nearly 14% in the Last 2 Days: ETFs in Focus).
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. Government reported last week that consumer spending from July-September happened to be the strongest in nearly 4 years.
These numbers show how the consumers would be spending their money which account for nearly two-third of the U.S. economy. “Consumers do not foresee the economy losing steam anytime soon," said Conference Board economist Lynn Franco. "Rather, they expect the strong pace of growth to carry over into early 2019 (read: Shrug Off Rate Fears, Consumer Staples ETFs Are on a Tear).”
The sector has got a boost from the strong labor market as unemployment rate (3.7%) is at a 49-year low. Share of respondents saying that jobs are “plentiful” rose to 45.9% record high since January 2001. “At the end of the day, it is the job market, or the security of having a job with a regular paycheck, that supports confidence and spending,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
Economy is growing at a robust rate of 3.5% in the third quarter down from an exceptional 4.2% rate of growth in previous quarter. Consumer spending and retail inventories were the primary factors driving growth in the third quarter. However, business investment and capital expansion suffered over the past three months.
Tight financial condition and weak housing markets are proving as headwinds for the economy. Home price gains slowed in August, citing impact of higher mortgage rates. The S&P 500 index has fallen by more than 8% this month.
The escalating trade tension between Beijing and Washington could possibly weigh on the sentiment which seems very strong right now. The Trump administration plans on increasing tariff rate in the beginning of next year, affecting the essential list of items that citizens use on a regular basis. This comes at a time when growth in annual wage rate happens to be slow (below 3%).
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:
It tracks the MVIS US Listed Retail 25 Index. There are 25 holdings in the fund pool and Amazon (AMZN) is the top weight holder with 20.3%. AUM is $117.4 million and expense ratio is 0.35%. It has Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
iShares US Consumer Services ETF (IYC - Free Report) -- Up 7.4% 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 $924.2 million and expense ratio is 0.43%. It has Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) -- Up 5.9% 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 $14 billion and expense ratio is 0.13%. It has Zacks Rank #2 with a Medium risk outlook. It has a Zacks ETF Rank #2 with a Medium risk outlook.
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) with 5.3%. AUM is $401 million and the expense ratio is 0.65%.
The fund tracks the MSCI USA IMI Consumer Discretionary Index and comprises 338 holdings with Amazon the top weight holder (18.4%). AUM is $694.5 million and expense ratio is 0.08%. It has a Zacks ETF Rank #3 with a Medium risk outlook.
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Consumer Confidence at 18-Year High: 5 ETFs to Buy
Consumer confidence reached an 18-year high as consumers portrayed positive sentiments toward economic outlook. These numbers suggest that growth would continue in the time to come and is a good sign for the upcoming holiday season (see: all the Consumer Discretionary ETFs).
Per the Conference Board, the reading increased to 137.9 in October, up from a downwardly revised 135.3 in September. Poll conducted by Reuters indicated that the index would slip to 136 from the previously reported 138.4 (read: Amazon Slumps Nearly 14% in the Last 2 Days: ETFs in Focus).
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. Government reported last week that consumer spending from July-September happened to be the strongest in nearly 4 years.
These numbers show how the consumers would be spending their money which account for nearly two-third of the U.S. economy. “Consumers do not foresee the economy losing steam anytime soon," said Conference Board economist Lynn Franco. "Rather, they expect the strong pace of growth to carry over into early 2019 (read: Shrug Off Rate Fears, Consumer Staples ETFs Are on a Tear).”
The sector has got a boost from the strong labor market as unemployment rate (3.7%) is at a 49-year low. Share of respondents saying that jobs are “plentiful” rose to 45.9% record high since January 2001. “At the end of the day, it is the job market, or the security of having a job with a regular paycheck, that supports confidence and spending,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
Economy is growing at a robust rate of 3.5% in the third quarter down from an exceptional 4.2% rate of growth in previous quarter. Consumer spending and retail inventories were the primary factors driving growth in the third quarter. However, business investment and capital expansion suffered over the past three months.
Tight financial condition and weak housing markets are proving as headwinds for the economy. Home price gains slowed in August, citing impact of higher mortgage rates. The S&P 500 index has fallen by more than 8% this month.
The escalating trade tension between Beijing and Washington could possibly weigh on the sentiment which seems very strong right now. The Trump administration plans on increasing tariff rate in the beginning of next year, affecting the essential list of items that citizens use on a regular basis. This comes at a time when growth in annual wage rate happens to be slow (below 3%).
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:
VanEck Vectors Retail ETF (RTH - Free Report) -- Up 11.6% YTD
It tracks the MVIS US Listed Retail 25 Index. There are 25 holdings in the fund pool and Amazon (AMZN) is the top weight holder with 20.3%. AUM is $117.4 million and expense ratio is 0.35%. It has Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
iShares US Consumer Services ETF (IYC - Free Report) -- Up 7.4% 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 $924.2 million and expense ratio is 0.43%. It has Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) -- Up 5.9% 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 $14 billion and expense ratio is 0.13%. It has Zacks Rank #2 with a Medium risk outlook. It has a Zacks ETF Rank #2 with a Medium risk outlook.
Amplify Online Retail ETF (IBUY - Free Report) -- Up 4.3% 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) with 5.3%. AUM is $401 million and the expense ratio is 0.65%.
Fidelity MSCI Consumer Discretionary Index ETF (FDIS - Free Report) —Up 4% YTD
The fund tracks the MSCI USA IMI Consumer Discretionary Index and comprises 338 holdings with Amazon the top weight holder (18.4%). AUM is $694.5 million and expense ratio is 0.08%. It has a Zacks ETF Rank #3 with a Medium risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>