After faltering to start the year, Consumer Discretionary Select Sector SPDR (NYSEArca: XLY), the largest consumer discretionary exchange traded fund, is sporting a year-to-date gain of more than 1% and some traders see more near-term upside for XLY and the consumer discretionary sector.
XLY, the largest consumer discretionary ETF by assets, includes exposure to retail firms, restaurants, media companies, apparel and luxury goods companies, automobile manufacturers and leisure industries.
Retailers make up a large portion of the underlying holdings. E-commerce and greater mobile commerce usage has also been a big game changer in the industry, especially with more consumers using online sources like Amazon, which XLY holds.
Related: 13 Tasty Consumer Staples ETFs to Feast On
Speaking of Amazon.com (NasdaqGS: AMZN), a major component in XLY, that is one of the stocks that will need to contribute in order for XLY to make new highs. The VanEck Vectors Retail ETF (NYSEArca: RTH) holds one of the largest Amazon stakes among all ETFs.
RTH covers the 25 largest U.S. companies involved in retail distribution, wholesalers, on-line, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. Top components include Amazon (NasdaqGS: AMZN), Home Depot (NYSE: HD) and Wal-Mart (NYSE: WMT).
“The XLY has been bolstered by its bigger holdings’ upswings, including Amazon and McDonald’s, both of which exceeded earnings forecasts and are some of the market’s best performing stocks. Andrew Keene of AlphaShark believes that longer-term trends also suggest that the XLY will keep moving up,” reports CNBC.
[related_stories]Dow components Home Depot and McDonald’s (NYSE: MCD) are also two marquee holdings in XLY.
Another, new entrant to the retail ETF market focuses on online retailers. The Amplify Online Retail ETF (NASDAQ: IBUY) launched last month. IBUY seeks to replicate the price and yield performance of the EQM Online Retail Index (IBUYXT). The rules-based index is comprised of a diverse group of companies that generate at least 70 percent of their revenue from online and virtual retail sales.
Related: Retail ETFs: Be Careful Shopping With Amazon, Home Depot, Wal-Mart
The Vanguard Consumer Discretionary (NYSEArca: VCR) is one of the most familiar names among consumer discretionary ETFs. It is also the least expensive with an annual expense ratio of just 0.1%, or $10 per $10,000 invested.
Other factors are at play for discretionary ETFs, including rising wages and the higher minimum wage. including the rising minimum wage. Meanwhile, a growing segment of America is calling for higher minimum wages across the government after years of stalled efforts. The national minimum wage has been set at $7.25 per hour since 2009, and changes would require the support of the Republican-controlled Congress.
For more information on the Retail ETF market, visit our Retail category.
Consumer Discretionary Select Sector SPDR
