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Four ETFs Driven By Consumer Spending

These ETFs could get a lift from an increase in consumer spending which contributed to a rise in third-quarter GDP.

NEW YORK (TheStreet) -- The U.S. economy may not be growing at a rate to generate new jobs, but it did grow at a faster-than-expected rate in the third quarter, buoyed much by an increase in consumer spending.

Possibly reaping the benefits of this increase in consumer spending could be the

Consumer Discretionary Select Sector SPDR

(XLY) - Get Consumer Discretionary Select Sector SPDR Fund Report

, the

Vanguard Consumer Discretionary

(VCR) - Get Vanguard Consumer Discretionary ETF Report

, the

PowerShares Dynamic Consumer Discretionary

(PEZ) - Get Invesco DWA Consumer Cyclicals Momentum ETF Report

, and the

Retail HOLDRs

(RTH) - Get VanEck Retail ETF Report


  • Consumer Discretionary Select Sector SPDR holds 81 different stocks that are driven by consumer spending. Top holdings include fast food giant McDonald's Corp (MCD) - Get McDonald's Corporation Report, Walt Disney (DIS) - Get Walt Disney Company Report and Amazon (AMZN) - Get, Inc. Report .
  • Vanguard Consumer Discretionary is the most diverse ETF of its kind with 378 holdings. VCR includes Amazon and Target in its top holdings.
  • PowerShares Dynamic Consumer Discretionart is mid-cap blend of 60 holdings. The top holding is luxury retailer Coach (COH) .
  • Retail HOLDRs is heavily concentrated on discount retailers. RTH allocates 19.48 % of its assets to Wal-Mart, 10.93% to Amazon and 8.68% to Target.

According to the Commerce Department, consumer spending, which accounts for nearly 70% of U.S. gross domestic product, increased by a 2.4% annual rate during the third quarter. Furthermore, retail sales rose in each of the three months in the third quarter with a further detail indicating that this rise is broad-based.

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As for the next few months, the National Retail Federation expects the upcoming holiday season to be the best one in the past four years with sales increasing by 2.3% from a year ago. With this in mind, retailers like


(WMT) - Get Walmart Inc. Report



(TGT) - Get Target Corporation Report

and Amazon.

The recent increases in consumer spending and the expected holiday season increases are likely being driven by the fact that some consumers believe that the economic recovery in the U.S. is intact and the labor markets can't get much weaker than they are currently. Additionally, it appears that some consumers who pushed essential purchases back during the height of the Great Recession are finally starting to loosen their grip on their wallets.

Although it appears the aforementioned ETFs have already absorbed the blows dealt with consumers reluctant to spend, a weak labor force and weak consumer sentiment, it is equally important to consider the forces that could hinder them. Some of these forces include deflation, inflation, and a stubbornly weak real estate sector which could take a further blow due to enhanced foreclosures hitting the market.

Written by Kevin Grewal of in Houston


Grewal has no positions in the securities mentioned


Kevin Grewal is the founder, editor and publisher of

ETF Tutor and serves as the editor at , where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.