The Consumer Discretionary Select Sector SPDR (NYSEArca: XLY), the largest exchange traded fund tracking consumer discretionary equities, is higher by about 8% this year, good for a mediocre showing among the sector SPDR ETFs.
The holiday shopping season has been vexing for retailers and some discretionary names.
Consumer spending has been muted this holiday season. According to First Data, retail spending is up 2%, or slightly slower than the 2.4% gain at this time last year, as online spending outpaces buying in physical stores from October 29 through December 12, reports Anne D’Innocenzio for the Associated Press. In contrast, online sales growth was up 9%.
However, some market observers believe the discretionary sector is poised for better things in 2017.
XLY’s “price has been trading within a steady uptrend since early 2015 and the momentum has started to accelerate in recent months. Strong Black Friday, Cyber Monday and holiday spending reports suggest that the bulls have lots to cheer about and based on technical analysis the recent close above the dotted trendline suggests that momentum could continue for the first few months of 2017,” according to Investopedia.
Rivals to XLY include the Vanguard Consumer Discretionary (NYSEArca: VCR) and Fidelity MSCI Consumer Discretionary Index (NYSEArca: FDIS).
The Consumer Confidence Index showed a 98.6 reading this month, reflecting a dip in consumers’ assessment of current business conditions and employment prospects, after rising in September to 103.5, its highest reading since January 2015, the Associated Press reports.
Starbucks and Nike are top 10 holdings in XLY. Nike is one of several Dow components found among the top 10 holdings cap-weighted discretionary ETFs. Unfortunately, the Dow’s discretionary stocks are among its worst-performing members this year.
If not for the contributions of high-flying Amazon (NASDAQ: AMZN), usually the largest holding in traditional discretionary ETFs, XLY and rival discretionary ETFs would be sporting even more tepid performances this year.
Regarding Amazon, “the recent retracement toward the support of the 200-day moving average near $727.28 is providing one of the best risk/reward ratios of 2016 and could be an ideal time to position oneself for a continued move higher in 2017,” reports Investopedia.
For more information on the consumer sector, visit our consumer discretionary category.