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.
Rivals to XLY include the Vanguard Consumer Discretionary (NYSEArca: VCR) and Fidelity MSCI Consumer Discretionary Index (NYSEArca: FDIS).
For more information on the consumer sector, visit our consumer discretionary category.