In addition, profit margins in the consumer discretionary sector of the S&P 500 Index have been above 6.5% in recent quarters, but have not shown much expansion since 2011.1 Fortunately, The bullish news for this sector lies in the fact that margins are high relative to the 1990s and 2000s, and a strong dollar has made the sourcing of goods cheaper. On balance, I expect the positives of the consumer sector to outweigh the negatives, but investors should also be wary of the risks.
After talking to an advisor, investors looking for exposure to the consumer sector should consider the PowerShares DWA Consumer Cyclicals Momentum Portfolio (PEZ), the PowerShares S&P SmallCap Consumer Discretionary Portfolio (PSCD), or PowerShares Dynamic Retail Portfolio (PMR).
1 Source: Bloomberg L.P., June 26, 2015
2 Source: U.S. Census Bureau, June 23, 2015
3 Source: Bloomberg L.P., June 29, 2015
4 Source: U.S. Commerce Department, June 30, 2015
5 PEZ maintained a 2.7% position in Starbucks as of July 2, 2015. PRM maintained a 4.69% position in Costco and a 5.15% position in Target as of July 2, 2015.