Retail sector exchange traded funds could soon feel the ripple effect of the U.S. shutdown and brinkmanship, with consumers remaining cautious and confidence touching a 10-month low.
The Thomson Reuters/University of Michigan final consumer sentiment index declined to a worse-than-expected 73.2, the weakest this year, reports Ben Schenkel for Bloomberg. Nevertheless, any readings above 50 reflect optimism. [Stock ETFs Dependent On Consumer Spending May Be In Trouble]
“This political uncertainty is going to slow any momentum we’ve had in the past few months,” Millan Mulraine, director of U.S. rates research at TD Securities USA LLC, said in the article. “If we come into December without any progress on a funding bill, consumers will start sitting on their hands and that will mean a slower rebound in spending.”
The sentiment index averaged 89 in the five years prior to the great depression, and averaged 64.2 in the 18-months ended June 2009.
Improvements in hiring would help bolster spending, but the Labor Department revealed that employers added a lower-than-expected 148,000 new works in September.
Firms are already experiencing a dip in discretionary spending.
“Consumer sentiment is guarded at best,” Wyman T. Roberts, chief executive officer and president of Brinker International Inc. (EAT), said in the article. “While employment rates are showing signs of improvement, casual dining in particular is being impacted by struggles many young adults are facing.”
Some retail sector ETFs include the SPDR S&P Retail ETF (NYSEArca: XRT), Market Vectors Retail ETF (NYSEArca: RTH) and PowerShares Dynamic Retail Portfolio (NYSEArca: PMR). Year-to-date, XRT is up 32.8%, RTH gained 35.2% and PMR rose 38.9%.
For more information on the retail sector, visit our retail category.
Max Chen contributed to this article.