Consumer confidence in the United States hit a one-year high mark in March. The Conference Board's measure of consumer confidence index stands at 109.7, comparing favorably with February’s reading of 90.4. The metric witnessed the largest increase since April 2003 (according to a Reuters article). Moreover, March’s reading beat the consensus estimate of 96.9, per a Reuters’ poll. However, the metric continues to be below the pre-pandemic level of 132.6 in February 2020.
The Present Situation Index, which gauges consumer views on current business and labor market conditions, rose to 110 last month from 89.6 in February. Meanwhile, the Expectations Index, which is a measure of consumers’ short-term (for the next six months) outlook for income, business and labor market conditions, climbed to 109.6 in March from February’s 90.9.
Moreover, the survey’s labor market differential, calculated from data on respondents’ views on whether sufficient jobs are available or difficult to get, surged to a reading of 7.8 last month from (0.8) in February, per a Reuters article. Meanwhile, uncertainty surrounding the coronavirus pandemic with concerns looming around the new variants may keep a check on consumer spending, in the near term at least.
In this regard, Lynn Franco, Senior Director of Economic Indicators at The Conference Board, reportedly said, “consumers’ renewed optimism boosted their purchasing intentions for homes, autos and several big-ticket items. However, concerns of inflation in the short-term rose, most likely due to rising prices at the pump, and may temper spending intentions in the months ahead,” per a Reuters article.
Factors Instilling Optimism
The U.S. economy is appearing to be on the path of recovery from the pandemic-led slowdown. Markedly, accelerated vaccine distribution, strong fiscal stimulus support and the reopening of non-essential businesses are expected to fasten the economic recovery pace.
It is worth noting here that the University of Michigan’s final sentiment index also surged to 84.9, comparing favorably with March’s preliminary reading of 83. The metric also beat the median estimate of 83.6, per a Bloomberg poll. The reading is also up from 76.80 in February but disappoints when compared to 89.10 in the year-ago period. It is important to note that the survey has covered responses received through Feb 24 to Mar 22, according to the article mentioned above.
The measure of current economic conditions climbed to 93 in March from 86.2 in February, per a Bloomberg article. Moreover, a gauge of consumer expectations was up 9 points to 79.7 in March. Going on, a measure of the economic outlook for next year rose 25 points to 108 in March, hitting a one-year high mark.
Encouragingly, President Joe Biden now aims at distributing 200 million coronavirus vaccines within his first 100 days since joining office, per a CNBC article. Notably, at least 100 million coronavirus vaccinations have already been distributed since he took office.
Markedly, the unemployment levels are also improving, signaling that the economy is on the mend. The U.S. economy added 379,000 jobs in February 2021 after a revised rise of 166,000 in January, beating market expectations of an increase of 182,000, per verified sources.
Moving on, the Fed in its commitment to drive economic recovery has decided to maintain rates near zero until 2023, at least.
ETFs That Might Gain
The moderate improvement in consumer confidence is likely to boost the consumer discretionary sector, which attracts a major portion of consumer spending. Also, the space comprises businesses that sell goods and services, which are considered non-essential by consumers. Markedly, the sector is likely to be a major gainer as the U.S. economy gradually returns to the pre-pandemic level as more parts of it reopen.
Below, we have highlighted the four most popular ones that target the broader consumer discretionary sector (see all Consumer Discretionary ETFs):
The Consumer Discretionary Select Sector SPDR Fund XLY
This is the largest and most popular product in the consumer discretionary space, with AUM of $19.12 billion. It tracks the Consumer Discretionary Select Sector Index. The fund charges 12 basis points (bps) in fees per year and carries a Zacks ETF Rank #2 (Buy), with a Medium-risk outlook (read: Why Fear Rising Rates? Play Cyclical ETFs).
Vanguard Consumer Discretionary ETF VCR
This fund currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Index. VCR charges investors 10 bps in annual fees. The product has managed $5.49 billion in its asset base and carries a Zacks ETF Rank #2, with a Medium-risk outlook (read: Consumer Discretionary ETFs to Ride Stimulus & Vaccine Optimism).
First Trust Consumer Discretionary AlphaDEX ETF FXD
This fund tracks the StrataQuant Consumer Discretionary Index, which employs the AlphaDEX stock-selection methodology to select stocks from the Russell 1000 Index. FXD has AUM of $1.69 billion. It charges 63 bps in annual fees and has a Zacks ETF Rank #2, with a Medium-risk outlook (read: Will ETFs Rally as US Consumer Confidence Improves in February?).
Fidelity MSCI Consumer Discretionary Index ETF FDIS
This fund tracks the MSCI USA IMI (LON:IMI) Consumer Discretionary Index. The product has amassed $1.43 billion in its asset base. It charges 8 bps in annual fees from investors and carries a Zacks ETF Rank #2, with a Medium-risk outlook (read: Cash in on the Reopening US Economy Optimism With These ETFs).
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Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
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