This year has brought an extension of the bull market, but consumer discretionary, one of the S&P 500’s leading sectors over the past three years, has gone from leader to laggard.
If not for the Energy Select Sector SPDR (NYSEArca: XLE), the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) would be the worst of the nine sector SPDR exchange traded funds. As it is is up just two-thirds of a percent this year. That is better than XLE’s showing, but still a far cry from what the S&P 500 has offered.
Finding true leadership among consumer cyclical ETFs this year is tricky, but a reduction in expectations to merely solid performers does turn up what could be a compelling opportunity with the holiday shopping season here. [Pre-Holiday Look at Retail ETFs]
The Market Vectors Retail ETF (NYSEArca: RTH) is up 6.1% this year. Although that makes it a broader market laggard, RTH’s performance is also enough to make it a star among consumer cyclical ETFs. In fact, to this point, RTH’s is 2014’s best consumer cyclical ETF.
RTH’s 2014 showing is all the more impressive when taking a look at some of its marquee. The $91.8 million ETF allocates nearly a combined quarter of its weight to Wal-Mart (NYSE: WMT), Amazon (NasdaqGS: AMZN) and Target (NYSE: TGT). To put that into context, Wal-Mart is one of the Dow’s worst performers this year while Amazon is in a bear market. [Amazon Hurts These ETFs]
The good news for RTH is that the other seven members of its top-10 lineup have traded higher this year, including an almost 26% gain for McKesson (NYSE: MCK). Costco (NasdaqGS: COST), Home Depot (NYSE: HD) and CVS Caremark (NYSE: CVS) have posted an average year-to-date gain of about 17%. Those three stocks combine for over 20% of RTH’s weight. [Home Depot Lifts These ETFs]
Data indicate RTH could be poised to finish the year on a strong note. Challenger, Gray & Christmas Inc. expects retailers’ seasonal hiring levels could hit 800,000 for the first time since the dotcom boom while the Hay Group calculates that 24% of companies plan to hire more full-time staff in 2014, compared to 13% last year.
The retail workforce build-up ahead of the holiday season potentially indicate that retailers are more optimistic over the expanding economy and consumers’ potential spending power this year.
Market Vectors Retail ETF
ETF Trends editorial team contributed to this post.