iShares Dow Jones US Consumer Ser. (ETF) (AMEX:IYC)

In the consumerist society we live in, consumer-spending pattern has ascended to the ranks of other macro economic indicators like inflation, GDP growth that reflects the health of an economy. Now with economy turning service oriented, it did not took long for ETF’s to cash in on the area of consumer service based funds.

iShares Dow Jones US Consumer Service Index Fund (IYC), one of the oldest such fund tracks the Dow Jones consumer services index while charging a fee of 0.48%.The fund has 68 % of its assets invested in retailing and broadcasting and entertainment sector with each cornering 43% and 25% respectively. With management fee similar to its competitors, its main point of differentiation is diversification and the ability to ride the wave as it starts. The fund with 248 securities is fairly diversified with the largest holding not exceeding 7%. The fund had a good one-year return to show as it posted 10.4% in 2006, thanks largely to the positive mood in the U.S.economy.

U.S retail growth, which was 6.3% in 2006, is slated to slow down to 4.8% due to factors like housing sector slump, interest rate rise and energy price rally that are expected to happen in 2007. A housing slump, among other things will lead to a hike in mortgage rate leading to a dampening in consumer spending. The broadcasting and entertainment sector also does not see a bright future as the companies see a shift in the advertising revenue from traditional players to internet based players. With a larger exposure to traditional broadcasting and entertainment players IYC stands to loss more than it stands to gain. Thus IYC, like the U.S economy looks set to shift gear into mediocre mode.