Since the fund is a cyclical play tied to consumer spending “it’s not an ETF to own when the United States is facing a prolonged recessionary environment,” according to the report. “At the same time, cyclical firms usually do rally before the economy fully emerges from a slump.”
XLY is up 10.3% year to date to outperform the S&P 500.
“In recent months, consumer sentiment has rebounded nicely. However, income isn’t growing much, so even with slight gains in employment, continued expansion may be stunted or halted altogether if there is not more job growth,” Morningstar noted. “On the positive side, interest rates are low, and history has shown that the U.S. consumer has proved resilient.”
Consumer Discretionary Select Sector SPDR
