Are you thinking this recent correction is a buying opportunity? If so, you may want to take a look at the consumer discretionary sector, along with sector related exchange traded funds (ETFs).
While many are affected by unemployment and the housing market, most Americans have moved on. The net worth of U.S. households jumped $56.8 trillion in the fourth quarter of 2010, up around $2.1 trillion from the third quarter, writes Ben Rooney for Yahoo! Finance. Corporate equities held by American households also rose $1 trillion to $8.5 trillion as the S&P 500 increased 10% in the fourth quarter. Meanwhile, household debt diminished 0.5%.
Why consumer discretionary? Based on recent economic data, American shoppers and emerging market consumers are spending again. While spending may not be as high as it used to be, discretionary spending could begin to pick up. Fund managers are also bargain shopping on retailers that have expanded abroad while keeping costs down. [4 Consumer ETFs for Renewed Confidence.]
The February employment report revealed a gain of 192,000 jobs – the highest gain in almost four years – joblessness fell to 8.9%. The Commerce Department announced gains of 1% in U.S. February retail sales, reports Bob Willis for Bloomberg. John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC, stated that “consumers have better job security and there is pent-up demand for goods and services,” even with gas prices as high as they are now.
A point of caution: the economic upturn has been selective. You only need to look at the high unemployment rate to figure that, and even some Americans lucky enough to be employed are struggling under the weight of stagnant salaries or even pay cuts. [Retail ETFs: Luxury Makes a Comeback.]
- First Trust Consumer Discretionary AlphaDEX (NYSEArca: FXD)
- PowerShares Dynamic Consumer Discretionary (NYSEArca: PEZ)
- Vanguard Consumer Discretionary (NYSEArca: VCR)
- SPDR Consumer Discretionary Select Sector Fund (NYSEArca: XLY)
For more information on the consumer discretionary sector, visit our consumer discretionary category.
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.