That didn’t beat information technology, the top performer, with a gain of about 28%. But from here on out, consumer discretionary — which can be traded through many big exchange-traded funds like the Consumer Discretionary Select Sector SPDR (XLY) or Vanguard Consumer Discretionary Index ETF (VCR) — has something going for it that not even technology can match: a perfect, if limited, history of big returns after strong starts to calendar years.
Since 1990, when consumer discretionary has gained at least 15% from January through April, the sector has always been positive through the remainder of the year, according to a CNBC analysis of Kensho, a machine-learning tool used by Wall Street banks and hedge funds to mine potential trading profits from historical market data.
It’s happened 5 times and the average return was more than 11%.
The Vanguard consumer discretionary ETF has been one of the hottest sector bets with investors among U.S. equity funds, taking in near-$200 million in assets in May. BlackRock’s iShares US Consumer Services ETF (IYC) has been the biggest winner with investor among U.S. equity funds in the past week, taking in $75 million, according to data from XTF.com.
Amazon is the No. 1 holding in the consumer discretionary index and all three of the ETFs — XLY, VCR and IYC.
Wall Street stock pickers have also zeroed in on Amazon as one of the stocks that may outperform amid trade tensions between the U.S. and China.
Goldman Sachs cited the “services” component of Amazon and other stocks as a reason to hold during market volatility triggered by Chinese tensions, and also pointed clients to Home Depot and McDonald’s.
Home Depot and McDonald’s are among the top 10 holdings in all the big consumer discretionary ETFs.
The Consumer Discretionary Select Sector SPDR ETF (XLF) was unchanged in after-hours trading Thursday. Year-to-date, XLF has declined -1.83%, versus a 7.85% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of CNBC.