The consumer sector was on the radar last week for host of reasons. While U.S. growth in the second quarter hit a 33-year low and July's consumer confidence as measured by the University of Michigan was weaker than expected at 93.1, as well as down from 96.1 in June, stocks and related ETFs got a boost with several consumer ETFs hitting a fresh 52-week high.
While the consumer sector as a whole – cyclical or non-cyclical – was in a decent shape last week, the staples stocks deserve a special mention. Most probably, investors are pinning hopes on lower oil prices which should continue to add up to consumers' fuel price savings and encourage consumers to loosen their purse strings (read: Consumer Staples ETF Investing 101)..
Moreover, Reuters noted that unemployment rate at 5.3% is perceived as almost full employment in the economy thanks to the fact that the rate is very near the Fed's goal of 5–5.2%. Investors should also note that though the consumer confidence slackened in July, it is still 13.8% higher than the year-ago level, per 33-year.
To add to this, the Fed still remains accommodative and backs the space by promising a slower rate hike trajectory once the step is actually taken, most probably sometime later on in 2015. A still low interest rate has been helping consumer staples stocks as these are known for high payouts.
If this was not enough, the global economy remains choppy thanks to dollar strength, commodity market crash, and the persistent upheaval in the Chinese economy and equity market. This bout of volatility has played its role in brightening the appeal for low-risk consumer staples stocks. Below we highlight three consumer ETFs which hit a new high on July 31 (read: 2 Recession Proof Sector ETFs for This Stormy Market).
iShares Dow Jones US Consumer Services Sector Index Fund (IYC)
The fund targets the Dow Jones US Consumer Services Index. The 180-stock fund has accumulated about $1.09 billion in assets. The fund has moderate company-specific concentration risk with the top holding Amazon accounting for 6.61% share of the basket (read: IYC: A Better Consumer ETF?).
The fund charges 45 bps in fees. It has a tilt toward retailing (34.04%) and media (25.37%) stocks. This fund surged to a new one-year high of $150.84 on July 31. So far this year, the fund is up 9.2% and has a Zacks ETF Rank #1 with a Medium risk outlook. Thanks to its bullish rank, the fund is expected to outperform the broader market in the coming days.
PowerShares DWA Consumer Staples Momentum Portfolio (PSL)
This ETF provides exposure to 32 stocks having positive relative strength (momentum) characteristics by tracking the DWA Consumer Staples Technical Leaders Index. It is often overlooked by investors as depicted by its AUM of $152.7 million. Expense ratio comes in at 0.60%.
