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Consumer Confidence Index – an important indicator of consumer sentiment – increased in the final month of 2015, rebounding strongly after its November decline. The Conference Board reported that the index rose to 96.5 from November’s upwardly revised reading of 92.6. It was also higher than the consensus estimate of 93.5. Meanwhile, consumers remained optimistic about the present economic environment and also confident of the economic scenario over the next six months. The Present Situation Index improved to 115.3 this month from last month’s level of 110.9. Also, the Expectations Index increased from November’s 80.4 to 83.9 in December. The survey showed that the share of consumers who believe that the current business conditions are “good” increased significantly to 27.3% in December from last month’s share of 25%. Also, the share of consumers who believe that there are “plentiful” job opportunities gained to 24.1% from 21%. Consumers who think that the job market will remain favorable also rose from 12% to 12.9%. Lynn Franco, Director of Economic Indicators at The Conference Board said: “As 2015 draws to a close, consumers’ assessment of the current state of the economy remains positive, particularly their assessment of the job market. Looking ahead to 2016, consumers are expecting little change in both business conditions and the labor market… but the optimists continue to outweigh the pessimists.” Favorable Economic Scenario Though the U.S. economy expanded at a slower pace of 2% in the third quarter compared with the 3.9% growth rate witnessed in the second, the economy remained steady for most part of the year whereas other major economies struggled with sluggish growth conditions. A gradual increase in consumer spending, which contributes nearly 75% to economic activity, along with healthy labor and housing market conditions boosted the U.S. economy through the year. Meanwhile, the lift-off that came this month after nearly a decade underlined the Fed’s, “confidence in the economy,” as cited by Fed Chair Janet Yellen herself. The Fed also indicated that “solid” consumer spending, a rebound in the housing market and strong business fixed investment played an important role in the decision (read: Top ETF Stories of 2015 ). 2 Consumer ETFs to Buy Consumer discretionary is considered to be one of the key sectors that attract a major portion of consumer spending, which is believed to increase at a gradual pace given the rise in confidence. Moreover, the slump in oil prices and strong labor market conditions will play an important role in boosting spending at least in the near term. The positives have been reflected in this year’s holiday season, with an e-commerce bonanza and a surge in last-minute shopping cheering the retailers. It has been reported that overall U.S. holiday retail sales (excluding autos and gas) climbed 7.9% year over year between Black Friday and Christmas Eve (read: Consumer ETFs & Stocks Riding High on Holiday Spirit ) Also, when the major benchmarks were grappling with manifold concerns, the consumer discretionary sector succeeded in posting healthy gains this year. As of Dec 30, 2015, the broader consumer discretionary sector – the Consumer Discretionary Select Sector SPDR ETF (NYSEARCA: XLY ) – gained 9.4% in the year-to-date frame. In this scenario, we have highlighted two Zacks Rank #1 (Strong Buy) retail ETFs that are poised to gain from this favorable environment and investing in them may prove to be profitable in the near term. Market Vectors Retail ETF (NYSEARCA: RTH ) This fund tracks the Market Vectors US Listed Retail 25 Index and holds about 26 stocks in its basket. It is a large cap centric fund and is heavily concentrated in the top 10 holdings with 65.6% of assets – the top shares going to Wal-Mart (NYSE: WMT ), Home Depot (NYSE: HD ) and Amazon.com (NASDAQ: AMZN ). Sector wise, specialty retail occupies the top position with around 29% share with Internet & catalog retail occupying the next spot. The fund has amassed $159.7 million in its asset base while average daily volume is moderate at 65,153 shares. The product has an expense ratio of 0.35% with a Medium risk outlook. RTH returned 6.2% and 9.6% in the past three-month period and in the year-to-date frame, respectively. Vanguard Consumer Discretionary ETF (NYSEARCA: VCR ) This product tracks the S&P Retail Select Industry Index, holding 385 securities in its basket. The fund charges only 12 bps in fees. It is also heavily concentrated in the top 10 holdings with 40.7% of assets. Large cap stocks dominate more than half of the portfolio while the rest have been split between the other two market cap levels. Sector wise, specialty retail takes the top spot at 19% share while Internet & catalog retail and restaurants occupy the next two positions. XRT currently has $2 billion of AUM and average daily volume of nearly 175,000 shares. The fund has a Medium risk outlook. VCR returned 4.3% and 5.7% in the past three-month period and in the year-to-date frame, respectively. Link to the original article on Zacks.com Scalper1 News
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