Consumer Discretionary SPDR (ETF) (AMEX:XLY)

The Consumer Discretionary Select SPDR ETF holds shares in a group of companies that sell products and services to consumers with representation from the media, specialty retail, hotels, restraints and leisure and auto components among the few.

Media industry accounts for more than a third of the corpus with the likes of Comcast, Time Warner, Walt Disney, News Corp, among many. The industry is seeing a transformation from the traditional distribution and moving to newer areas like vide on demand, IPTV etc. Though the content producers are reinventing the business model trying to capitalize on the digital market the industry remains vulnerable to piracy and saturation.

Retail forms the next big chunk that range from specialty, textiles, apparels, luxury goods, multi line, electronic, Internet and catalog retail. Household durable is facing huge competition from foreign players who benefit from cheap labor and government subsidies with the housing market slump adding to their worries. The outlook for the specialty retails business like Office Depot, Target and Lowes depends on the unique nature of the products or the demographics they serve.

Hotels, restaurant, leisure and cruise lines are sending mixed signals with aging population and supply supporting on one side and with terrorist attacks hindering growth on the other. The gaming and casino business is affected by unfavorable legislation in certain states but is reaping benefits arising out of the replacement of server based gaming machines. The smallholdings in the auto component wouldn’t matter much to the larger picture but is facing problem with the Detroit Big Three automobile companies loosing market share.

It return in the past year was 18.45% but fails to make a mark in terms of consistency of performance with average annualized return for the past five and three years at 6.78% and 7.72% respectively. Main objective of the fund is to track what the consumers spend beyond and above their normal purchasing capacity. Endorsing the same it needs a healthy economy with a mild inflation that would enable the companies to raise prices for profit. With GDP growth of US falling and signs of recession already setting in the stocks chances of beating the market looks dim.