ETF Research and Analysis

by Robert Goldsborough
Suitability
First Trust Consumer Discretionary AlphaDEX FXD offers investors exposure to U.S.-domiciled firms that reply on discretionary consumer spending. This strategic-beta exchange-traded fund holds 128 firms. However, investors   Read more 

Bull Case

The job market and housing market have continued to improve, and oil prices have been declining.
This ETF offers much more of a mid-cap tilt than do other consumer discretionary ETFs. As such, it provides purer exposure to the U.S. consumer discretionary sector than do some of its peers, whose holdings include firms with meaningful overseas businesses.
Morningstar's director of economic analysis forecasts solid gains in consumer spending in 2016, with consumption up by about 2.5% to 3.0% on an inflation-adjusted basis. Read more 

Bear Case

The firms held in this ETF are susceptible to the ebbs and flows of consumer confidence. Aside from being heavily dependent on disposable household income and consumer spending, the firms in this portfolio also are susceptible to changes in demographics and fickle consumer tastes.
This ETF has meaningfully underperformed traditional cap-weighted consumer discretionary ETFs over trailing one-, three-, and five-year periods.
This ETF's expense ratio is relatively high for a sector ETF. Read more 

Why Index Construction Matters for ETF Investors 
Watch more 

Premium Membership

View all of our analyst reports with a free trial to Morningstar.com Premium.