Institutional Investor

Portfolio Perspective: Emerging Outperformance By Consumer Discretionary?

— John Kosar, Asbury Research

The previously downtrodden U.S. consumer discretionary equity sector is not only showing some signs of life, but also the power to sustain it. The Consumer Discretionary Sector SPDR ETF (XLP), which had previously underperformed the S&P 500 SPDR ETF (SPY) by 7 percent between January 2 and July 25, has since quietly outperformed SPY by 2 percent. Moreover, our own metrics, which track current versus historic market sector-related exchange-traded fund asset flows, show that the biggest inflows over the past one-month and three-month periods have been into the consumer discretionary segment which has fueled the recent outperformance. As a result, XLP has been the second-best-performing sector SPDR ETF during the past month, posting a 1.6 percent gain versus 0.4 percent in SPY, and the third-best performer over the past three-month period, posting an 8.1 percent return versus 6.1 percent for SPY.


I view these asset flows as fuel for a market trend because they typically lead relative performance. As long as these positive inflows continue, so should recent relative outperformance in consumer discretionary.

Asbury Research, based in Schaumburg, IL, advises asset managers on strategic allocation, tactical positioning, and risk management.  John Kosar is the Director of Research at the firm. 


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