As inflation reached its highest point in four decades, consumers spent more in June across a range of pricier goods and services like gasoline, groceries, furniture, and even restaurants.
In a sign that consumers’ spending habits remain resilient amid record inflation and a continued COVID-19 pandemic, the Commerce Department reported on Friday that U.S. retail sales rose 1.0% in June. The report also showed that a decline in May was slightly smaller than previously estimated.
“The consumer has the ability to navigate these price increases,” Michelle Meyer, chief U.S. economist at the Mastercard Economics Institute, told the Wall Street Journal. “But clearly there is some frustration.”
After retail spending beat forecasts, U.S. stocks rebounded on Friday, ending a volatile week. The S&P 500 gained 1.7% Friday afternoon, while the Nasdaq Composite rose by 1.4%, and the Dow Jones Industrial Average went up by 1.9%.
The resiliency of the American shopper in the face of more expensive things may impact such exchange-traded funds that focus on consumer goods as the Invesco S&P 500 Equal Weight Consumer Discretionary ETF (RCD), the Invesco S&P 500 Equal Weight Consumer Staples ETF (RHS), and the Invesco DWA Consumer Cyclicals Momentum ETF (PEZ).
RCD, which tracks the S&P 500 Equal Weight Consumer Discretionary Index, offers exposure to the consumer discretionary sector of the domestic economy, making it one option available to investors implementing sector rotation strategies or looking to tilt exposure towards a high beta industry, according to VettaFi.
RHS follows the S&P 500 Equal Weight Consumer Staples Index. offers exposure to the consumer staples sector of the U.S. economy, making it one option available to investors implementing sector rotation strategies or looking to tilt exposure towards a low beta industry, perhaps in anticipation of a down market.
Both RCD and RHS are linked to equal-weighted indexes, meaning that component companies receive approximately equal allocations.
PEZ tracks the Dorsey Wright Consumer Cyclicals Technical Leaders Index. That index employs a unique methodology that could make the exchange traded fund an ideal sector play as tapering accelerates.
“The Index is designed to identify companies that are showing relative strength (momentum), and is composed of at least 30 securities from the NASDAQ US Benchmark Index,” according to Invesco. “Relative strength is the measurement of a security’s performance in a given universe over time as compared to the performance of all other securities in that universe.”
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