The consumer discretionary sector has been a laggard for much of this year, but the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) has recently firmed up with a 2.4% gain over the past month.
Struggles earlier in the year for XLY and rival consumer cyclical and retail exchange traded funds do not mean all ETFs of this ilk have been left behind. Just look at the Market Vectors Retail ETF (NYSEArca: RTH).
The $157.7 million RTH has returned 16.6% this year, a performance that tops the S&P 500 by 510 basis points. Making RTH’s status as this year’s top-performing consumer cyclical ETF are the following facts.
First, the ETF has achieved its class leading status even with a 7.5% weight to Amazon (NasdaqGS: AMZN). Shares of the e-commerce giant have plunged more than 25% this year, putting the stock well into a bear market. Second, RTH is a dedicated retail ETF, meaning it lacks the exposure to high-flying airline stocks that have boosted shares of other overachieving cyclical ETFs this year. [A Nifty Consumer Discretionary ETF]
Rather, it has been more traditional retailers that have boosted RTH’s fortunes this year. The allocates a combined 18.1% of its weight to Dow components Wal-Mart (NYSE: WMT) and Home Depot (NYSE: HD). Those stocks are up 12% and 24.9%, respectively, year-to-date and are two of the 15 Dow members that have returned at least 10% this year.
RTH has an advantage over traditional retail ETFs. While an ETF such as the SPDR S&P Retail ETF (NYSEArca: XRT) is usually heavily allocated to apparel, specialty and other highly cyclical retailers, RTH is able to mitigate the volatility associated with cyclical ETFs and the risks associated with fickle consumers via significant weights to stocks that pop in consumer staples ETFs.[Retail ETF Fights Off Amazon Weakness]