Direxion is bolstering its already expansive line of leveraged and inverse exchange-traded funds (ETFs) with four new products that reflect the most recent changes to the Global Industry Classification Standard (GICS®) sector changes. The new ETFs will offer savvy investors exposure to the existing Consumer Staples sector and to the Consumer Discretionary sector, updated by S&P Dow Jones in September 2018.
Under the new GICS structure, the Telecommunication Services sector expanded to include telecommunication companies, and select companies from the Consumer Discretionary and Information Technology sectors, and was renamed Communication Services.
Consumer Discretionary, which no longer includes media and entertainment companies, continues to primarily offer exposure to retailers, including Amazon and Home Depot. This sector remains an attractive option for growth investors with its continued exposure to stocks with relatively high expected earnings and sales growth.
Consumer Staples, on the other hand, retains a greater orientation toward value stocks with exposure to companies considered to be more essential to daily living, such as Procter & Gamble and Coca-Cola.
“The retail-oriented WANT and PASS allow traders to take bold positions on consumer discretionary stocks, while NEED and LACK will do the same for those looking for leveraged trades on today’s consumer staples stocks,” said David Mazza, Managing Director and Head of Product at Direxion.
While the new ETFs provide value and growth plays, investors who are looking for long-term buying opportunities need not apply, but can seek non-leveraged ETFs with similar strategies.
“They should be seen as short term trading vehicles, and those that buy the funds should monitor them actively,” said Andy O’Rourke, Managing Director, Chief Marketing Officer at Direxion. “If investors do like the new make-up of the indexes, there are non-leveraged ETFs that provide access to them.”
In late September, the S&P Dow Jones Indices reorganized the GICS, which brought a bevy of changes in not only tech, but also communications. As technology, consumer and media industries have evolved since the dot-com bubble, so have the companies within those respective sectors, and as such, this new reclassification is meant to reflect those changes.
“The changes are a step toward acknowledging the convergence of telecommunications, media, and select internet companies and the overlapping services rendered by these companies, within the GICS Structure,” S&P noted.
Brief recap of GICS changes:
- The broadening of the current Telecommunications sector (to be renamed the Communications sector) significantly alters the Information Technology and Consumer Discretionary sectors.
- Most of the affected S&P benchmarked sector ETFs rebalanced on Friday, September 21 at the close
- Communications Services (formally Telecommunications), will increase from roughly 2% to 10% of the S&P 500.
Technology will be reduced from approximately 26% to 20% of the S&P 500. - Consumer Discretionary will be reduced from approximately 13% to 10% of the S&P 500.
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