Consumer ETFs Worth Watching
The discretionary corner of the consumer sector has seen particularly impressive action; over the most recent one-month period, the Consumer Discretionary Select Sector SPDR
Given this recent show of resilience and the earnings calendar for the week ahead, funds designed to target top U.S. consumer destinations will likely be some of the more interesting products to watch. I encourage investors to wait until the festivities subside; but in the event that the earnings action goes smoothly, some of these products may even prove to be attractive options for those looking for a welcomed respite from the market's global macroeconomic challenges.
Consumer ETFs have been forced to prove themselves throughout the opening months of 2012. They have managed to carve out leadership roles in recent weeks, but since the start of the year, the mood toward XLY and the Consumer Staples Select Sector SPDR
These fears have proven to be short lived, however, and in recent weeks, the data have pointed to signs of strength. As a whole, last week's batch of economic news was lackluster at best.
One clear point of optimism, however, came last Monday, when investors learned that retail sales in March jumped 0.8%. In addition to beating analysts' estimates, this marked the second consecutive month of increases.
While the data have indicated a turnaround, high energy prices have remained a persistent challenge. Fortunately, even added pressure at the pump has failed to stem consumer buying habits or derail the sector. While worth monitoring, investors looking to the near term should avoid letting fuel prices dissuade them from venturing into this relatively strong market corner.
Discretionary-focused funds like XLY and the SPDR S&P Retail ETF
The XLP provides investors with one-stop-shop exposure to top staples names. Nevertheless, the fund needs to be approached carefully. Top holdings like Proctor & Gamble
In addition, with earnings season now in full force, many of these large positions may see an uptick in volatility. This week, for instance, Proctor & Gamble, PepsiCo
Investors will continue to face challenges on the road ahead as major global players combat against looming macroeconomic crises. While nerve-wracking, now is not the time to flee. There is still strength to be found in this market and with patience and a level head, it is possible to overcome these hurdles.
Written by Don Dion in Williamstown, Mass.