Consumer spending is oddly on the rise, even though unemployment also remains sky-high and jobs rarely been so hard to find. What’s going on? The luxury retail exchange traded fund (ETF) could provide a few answers.
There’s no one all-encompassing answer, but there are some clues to be found. Unemployed consumers are not the ones digging deep to keep on spending. Instead, the spike in spending since October has more to do with income.
While the usual economic data doesn’t break down spending by income category, wealthy consumers buy a disproportionate amount of stuff, so it makes sense that any rise in spending could be attributed largely or entirely to them, reports Rick Newman for U.S. News & World Report. The data showing that consumer spending rose 0.7% in October, while incomes rose a mere 0.2% is more evidence in favor of the argument that it’s the wealthier who are spending. (Is luxury spending getting more affordable?)
Here is a breakdown of how the spending registers, according to Moody’s:
- The top 10% of earners account for 22% of all spending
- The top 25 %of all earners account for 45 % of spending
- The bottom 50% of earners, by contrast, spend just 29% of all the money in the consumer economy
The wealthy aren’t likely to share their bonuses or their stock gains, of course, so mainstream Americans need to wait for the trickle-down benefits. And that highlights another economic anomaly: We may actually be in the midst of a two-tier recovery in which life is getting better for a small portion of Americans at the top of the income chain, by passing many ordinary Americans in the process. (Can luxury spending sustain in the long run?) For more stories about the luxury ETF, visit our ROB ETF category.
This all could explain in part the performance of the luxury ETF since the market’s low on March 9: the fund is up more than 100% since then.
- Claymore/Robb Report Global Luxury (NYSEArca: ROB): up 52.3% year-to-date
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.