Luxury ETF Takes a Hit As Rich Scale Back | ETF Trends

In a significant way, the affluent of this nation have helped pull our economy out of the recession –  well, as much as we have come. But recent data suggests that the rich have reined in spending as fears mount over the sustainability of our recovery. Right now, the future is uncertain, and that uncertainty has been reflected in the performance of exchange traded funds (ETFs) in recent months.

According to Motoko Rich of The New York Times, the highest income households have pulled back spending in part because of global economic instability, especially in Europe, and in part because of volatile markets. [ETFs and Markets Look to Earnings Season.]

The pace of the recovery will be “less robust than has been typical of past recoveries,” said Federal Reserve Bank of Richmond President Jeffrey Lacker. According to Darrell A. Hughes of NASDAQ, the GDP growth outlook was downgraded to between 3% and 3.5%.

Of note, the top 5% of income earners account for one-third of all consumer activity. Average spending in that group was $145 in May, but fell to $119 this past June. And although homebuyers in Manhattan and the Hamptons have returned, as well as purchasers of Mercedes Benz cars, high-end luxury hotel chains such as the Ritz have suffered from decreased bookings. Upscale retailers have also seen sales numbers slide in June. [The Importance of Consumer Spending.]

According to Tom Hauswirth, general manager and partner of Moritz Cadillac, BMW and Mini, “I think everybody was affected when they saw the stock market go below 10,000.” [What You Need to Know About 200-Day EMA.]

But it’s not just the rich who are fretting. “Consumer confidence slumped in July to its lowest point since August 2009.” The signs have become dire enough that the Federal Reserve even acknowledged that additional federal stimulus might be needed. Remember, the American consumer accounts for roughly two-thirds of this nation’s economic activity. [Will Consumer Discretionary Spending Push Us Ahead?]

  • Claymore/Robb Report Global Luxury Index ETF (NYSEArca: ROB)


Sumin Kim contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.