The U.S. economic numbers for the third quarter came in, and it looks like consumers are starting to spend again, though still not quite as much as before the financial crisis. Hopeful investors who believe in the power of the American consumer may want to take a look at some consumer-discretionary exchange traded funds (ETFs).
Consumer spending, which makes up almost 70% of U.S. GDP, increased by 2.4% in the third quarter, writes Kevin Grewal for DailyMarkets. Additionally, retail sales inched up in each of the three months of the quarter, indicating a broad base rise. [Why Retail ETFs Are Holding Strong.]
The National Retail Federation projects that yuletide sales will be 2.3% higher than last year.
The improved spending numbers are mainly based on the assumption that consumers are starting to believe in the recovery of the economy and the labor markets. Furthermore, those who have kept a firm grip on their savings accounts during the lean years may be loosening up.
However, consumer discretionary ETFs may run into trouble if deflation, inflation, or another blow to the weak real estate sector come into play.
- Consumer Discretionary Select Sector SPDR (NYSEArca: XLY). XLY has 81 holdings.
- Vanguard Consumer Discretionary (NYSEArca: VCR). VCR, with 378 holdings, is the most diverse fund of the lot.
- PowerShares Dynamic Consumer Discretionary (NYSEArca: PEZ). PEZ is a blend of 60 mid-cap companies.
- Retail HOLDRs (NYSEArca: RTH). RTH is highly weighted in its top holdings of discount retailers.
Max Chen contributed to this article.
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.