A drop in personal incomes has investors wondering about consumers and the impact on exchange traded funds (ETFs).

Personal incomes fell by 0.7% in July, the largest amount in nearly three years, reports Tim Paradis for the Associated Press.  At the same time, consumer spending rose 0.2%; however, with the impact of rising prices, spending actually fell by 0.4%.  Rising prices for gas and food continue to strap many household budgets.

Tropical Storm Gustav continues to head toward the Gulf of Mexico, causing concern for the oil rigs and refineries located there.  Oil rose more than $2.00 in early trading with concern of the storms impact.

If consumers continue to feel pressured by rising prices, what could that mean for the consumer spending and the related ETFs?

  • Vanguard Consumer Staples (VDC), down 1.3% year-to-date
  • Retail HOLDRs (RTH), up 3.8% year-to-date
  • Consumer Discretionary SPDR (XLY), down 5.2% year-to-date


The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.