As the market moves toward the late stages of the business cycle, consumer discretionary stocks and sector-related exchange traded funds could underperform other market segments. XLY allocates nearly 30% of its weight to Internet and direct marketing retailers.
“On the other hand, e-commerce-challenged retailers – those most at risk from the rising of Amazon – have seen same-store sales dropping 1.7%, as well as eroding margin and return on invested capital,” reports Barron’s.
Last year, index providers S&P and MSCI revealed they will be altering the telecom sector and renaming it communication services, meaning some of the media stocks currently held in XLY and rival cap-weighted consumer discretionary ETFs will leave that sector for the new communication services group. Those changes take place later this year.
For more information on the consumer sector, visit our consumer discretionary category.