U.S. consumers continue to be concerned about the sustainability of the economic recovery from the crisis brought on by the pandemic, increasing Delta variant threats, and rising inflation levels. As a result, consumer confidence in the United States fell to its lowest level in seven months in September. The Conference Board’s consumer confidence index stands at 109.3 (the lowest level since February) against 115.2 in August. The metric experienced the third consecutive monthly decline in September. The September reading also missed the metric’s consensus estimate at 114.5, according to a Reuters poll. The measurement continues to be below the pre-pandemic level of 132.6 in February 2020.

The current situation index, which measures consumers’ opinions on current business and labor market conditions, fell to 143.4 in September from 148.9 the previous month. The expectations index, which measures the short-term (for the next six months) outlook of consumers for income, business and labor market conditions, also fell to 86.6 from 92.8 in August.

In addition, the survey’s labor market differential, calculated from data on respondents’ opinions on the availability or difficulty of obtaining jobs, fell to 42.5 in September from 44.4 in August, according to a Reuters report.

In this regard, Lynn Franco, senior director of economic indicators at the Conference Board, reportedly said: “Consumer confidence fell in September as the spread of the Delta variant continued to dampen optimism. Concerns about the state of the economy and near-term growth prospects intensified, while spending intentions on homes, automobiles and major appliances retreated again. “

Consumers appear to be concerned about the high prices of homes, vehicles and durable household goods. In fact, the buying attitude for vehicles and homes is contracting.

Current US economic scenario

Wall Street saw muted performance during the seasonally weak September. Other concerns that have worried investors have included the increase in coronavirus cases due to the highly contagious Delta variant, soaring inflation levels, the uncertainty surrounding the Federal Reserve meeting and its decision to reduce the fiscal stimulus as well as the real estate crisis in China.

However, U.S. consumer sentiment has improved slightly despite growing concerns about rising coronavirus cases and rising inflation levels. Preliminary consumer sentiment at the University of Michigan rose to 71 in September, from 70.3 last month, according to a BloombergQuint article.

Strong consumer sentiment may be the main driver behind the strong performance of the consumer discretionary space, as consumers are expected to splurge this holiday season after being restrained for more than a year.

The latest retail sales data has pleasantly surprised investors. According to a CNBC article, the metric rose 0.7% sequentially in August 2021 compared to market expectations of a 0.8% decline. According to the Reuters report, online retail sales rose 5.3% last month after falling 4.6% in July. Sales of clothing and building materials and furniture increased in the previous month. Encouragingly, core retail sales rebounded 2.5% in August after declining 1.9% in July, according to the Reuters report. The measure highlights the expenditure component of GDP.

Progress in the deployment of the coronavirus vaccine presents a strong case for a faster return to normal and economic recovery. The FDA has approved the emergency use of a booster dose of COVID-19 vaccines from Pfizer Inc. (PFE) and BioNTech SE (BNTX). President Joe Biden also presented an effective plan to speed up the vaccination rate and control the coronavirus outbreak. It made it mandatory for federal employees to be vaccinated against COVID-19, according to a CNBC article. The Biden government will also issue guidelines to the Department of Labor to impose vaccination warrants on employers with more than 100 employees or perform weekly tests.

The United States will likely ease travel restrictions for international visitors vaccinated against COVID-19 in November, including those from the United Kingdom and the EU, the White House recently said, according to a CNBC report. Foreigners visiting the United States will be required to show proof of vaccination and a negative COVID-19 test taken within three days of departure. The latest White House announcement came after the peak summer travel season, signaling strong demand for vacation travel.

Notably, several restaurants and retailers that have resumed operations following an easing of restrictions in the United States are expected to see an acceleration in demand and footfall. Additionally, the leisure and entertainment space is expected to rebound as casinos and amusement parks begin to welcome visitors.

ETFs that could suffer

Falling consumer confidence is likely to hurt the consumer discretionary sector, which attracts a large chunk of consumer spending amid rising inflation. Here, we’ve highlighted the four most popular funds that target the broader consumer discretionary sector (see all Consumer Discretionary ETFs):

The selective consumer discretionary sector SPDR fund XLY

It is the largest and most popular product in the consumer discretionary space, with assets under management of $ 20.42 billion. It tracks the Consumer Discretionary Select Sector Index. The fund charges 12 basis points (bps) of fees per year and displays a Zacks ETF of rank 2 (buy), with a medium risk outlook (read: 5 ETFs to be cashed on record net worth of US households).

Vanguard Consumer Discretionary ETF Video recorder

This fund currently tracks the MSCI US Investable Market Consumer Discretionary 25/50 index. VCR charges investors 10 basis points in annual fees. The product has managed $ 6.72 billion in its asset base and carries a Zacks ETF No.1 (strong buy) ranking, with a medium risk outlook (read: ETF zones to gain from the next shopping season of holidays).

First Trust AlphaDEX Consumer Discretionary Fund FXD

This fund tracks the StrataQuant Consumer Discretionary Index, which uses the AlphaDEX stock selection methodology to select stocks for the Russell 1000 Index. FXD has assets under management of $ 1.99 billion. He charges 63 basis points in annual fees and has a Zacks ETF Rank # 3 (Hold), with a medium risk outlook.

Fidelity MSCI Consumer Discretionary Index ETF FDIS

This fund replicates the MSCI USA IMI Consumer Discretionary index. The product has amassed $ 1.63 billion in its asset base. It charges investors 8 basis points in annual fees and is rated Zacks ETF Rank # 2, with a medium risk outlook.

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Selected Consumer Discretionary Sector SPDR ETF (XLY): ETF Research Reports

Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports

ETF Fidelity MSCI Consumer Discretionary Index (FDIS): ETF Research Reports

First Trust Consumer Discretionary AlphaDEX ETFs (FXD): ETF Research Reports

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