Discretionary ETF Investors Could Find Coal This Holiday | ETF Trends

Diverging performances in domestic small-cap consumer sectors reveal investors’ darkening outlook on holiday sales and could point to further weakness in broader discretionary exchange traded funds.

The Russell 2000 Consumer Discretionary Index has fallen behind the Russell 2000 Consumer Staples Index by 2 percentage points over the past week, Bloomberg reports.

Steven DeSanctis, Bank of America Corp.’s strategist for small-cap equities, said that the two groups are a “classic trade” for gauging investor expectations on consumption since the companies have “very little overseas exposure” and better reflect American consumption.

Tim Ghriskey, chief investment officer at Solaris Group LLC, argues that the divergence show investors’ pessimism as more are bracing for a modest increase in sales due to a lackluster start to the shopping season.

“The market is telling us sales volumes and margins are becoming more of a concern,” Ghriskey said in the article. “The holiday season may be more disappointing than investors previously thought, especially in the U.S. and particularly for boutique-type retailers.”