5 ETFs To Ride On Rising Consumer Confidence

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Americans are growing optimistic about an economic recovery. This is especially true as the University of Michigan’s final sentiment index climbed to a pandemic high of 84.9 in late March from a preliminary reading of 83. Other measures of consumer confidence also seem to remain elevated. Consumer Confidence from the Conference Board is expected to rise to 96.9 in March from 91.3 in February and December’s low of 88.9.

The combination of a rapid pace of coronavirus vaccination and easing of business restrictions in many states are fueling consumer confidence. Additionally, the wave of unprecedented stimulus is acting as a huge catalyst for consumers to spend higher. Notably, consumer spending accounts for more than two-thirds of U.S. economic activity.

Further, the economy is poised to log its best performance in 37 years, thanks to the White House’s massive $1.9 trillion pandemic relief package and increased vaccinations against the coronavirus. The Federal Reserve expects much stronger growth this year, raising GDP growth projection from 4.2% to 6.5% for this year — the fastest since 1984. An improving economy will continue to lift consumer confidence.

Rising consumer confidence bodes well for household spending in the coming months and is expected to have a positive impact on the consumer discretionary sector, which attracts a major portion of consumer spending. As such, investors could tap the encouraging trend in the basket form through consumer discretionary ETFs. Below, we have highlighted five of these that target the broad consumer market and are enjoying strong momentum this year.

SPDR S&P Retail ETF (XRT - Free Report)

With AUM of $537.9 million, this product targets the broad retail sector by tracking the S&P Retail Select Industry Index. It holds 102 securities in its basket with key holdings in Internet & direct marketing retail, automotive retail, apparel retail, and specialty stores. The fund charges 35 bps in annual fees and has a Zacks ETF Rank #2 (Buy). It has gained 35.5% so far this year.

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