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Will ETFs Gain as U.S. Consumer Sentiment Improves in June?

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The latest preliminary report on June’s U.S. consumer sentiment shows that the metric has hit the highest level since 2016, largely due to falling unemployment levels and reopening of economic activities. The University of Michigan’s preliminary consumer sentiment index rose more than 9% to 78.9 in June from 72.3 in May. June witnessed the second straight monthly increase in the metric. The measure of current conditions also rose to 87.8 in the month from 82.3 in May. Meanwhile, a gauge of consumer expectations rose to 73.1 in June in comparison to 65.9 last month.

In this regard, Richard Curtin, Surveys of Consumers chief economist, said that “the turnaround is largely due to renewed gains in employment, with more consumers expecting declines in the jobless rate than at any other time in the long history of the Michigan surveys” (per a Business Standard article).

However, around two-third of consumers still expect the economy to face tough times this year due to worries over the resurgence of coronavirus infections in the United States and low employment levels. Going by the Johns Hopkins University data, the number of U.S. coronavirus infections passed the grim mark of two million and more than 115,000 Americans have lost their lives. In line with rising number of coronavirus cases, United States saw 19,532 new cases on Jun 14. Per a CNN report, coronavirus cases have surged in 18 states over the past week, with six states reporting over a 50% jump. Resultantly, some government and health officials have paused the reopening efforts for some time.

ETFs in Focus

The outbreak is expected to have an impact on the consumer discretionary sector, which attracts a major portion of consumer spending. Below, we have highlighted the five most popular ones that target the broader consumer discretionary sector (see all Consumer Discretionary ETFs):

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

This is the largest and most popular product in the consumer discretionary space, with AUM of $13.14 billion. It tracks the Consumer Discretionary Select Sector Index, holding 63 securities in its basket. The fund charges 13 basis points (bps) in fees per year and carries a Zacks ETF Rank #2 (Buy), with a Medium-risk outlook (read: ETFs to Gain or Lose From Solid May Jobs Data).

Vanguard Consumer Discretionary ETF (VCR - Free Report)

This fund currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Index and holds 296 stocks in its basket. VCR charges investors 10 bps in annual fees. The product has managed $2.99 billion in its asset base and carries a Zacks ETF Rank #3 (Hold), with a Medium-risk outlook (read: Consumer Discretionary ETFs in Focus as US Readies to Reopen).

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

This fund tracks the MSCI USA IMI Consumer Discretionary Index, holding 254 stocks in its basket. The product has amassed $715.1 million in its asset base. It charges 8 bps in annual fees from investors and carries a Zacks ETF Rank #3, with a Medium-risk outlook (read: Missed the Big Five Tech Rally? Buy the Dip With These ETFs).

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

This fund tracks the StrataQuant Consumer Discretionary Index, which employs the AlphaDEX stock-selection methodology to select stocks from the Russell 1000 Index. This approach results in a basket of 123 stocks. FXD has AUM of $680 million. It charges 64 bps in annual fees and has a Zacks ETF Rank #3, with a Medium-risk outlook (read: Consumer Discretionary ETFs to Bet on in June).

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