XLY, the consumer discretionary ETF, has been on an incredibly strong run since U.S. stocks bottomed in 2009 after the credit crisis.
The sector fund has outperformed the S&P 500 every calendar year since the end of 2008 and is on track to top the index again this year.
XLY has a five-year annualized return of 17.3% versus 7.4% for the S&P 500. The consumer discretionary ETF is trading near an all-time high.
The fund owns retail firms, restaurants, media companies, apparel and luxury goods companies, automobile manufacturers, and leisure firms, according to a Morningstar profile of XLY.
The ETF is “a cyclical play tied to consumer spending,” says Morningstar analyst Robert Goldsborough. “At the same time, cyclical firms usually do rally before the economy fully emerges from a slump. Consumer confidence in the United States has risen sharply in recent months, recently hitting its highest levels in five years as consumers hold a more positive outlook toward job growth and the economy. In addition, consumer net worth, or consumer assets, recently reached a number exceeding pre-financial crisis levels.”
The chart below shows the relative performance of the consumer discretionary ETF versus the S&P 500.
