ETF Research and Analysis

by Robert Goldsborough
Suitability
First Trust Consumer Discretionary AlphaDEX FXD is suitable for a complementary satellite holding to a diversified portfolio. This exchange-traded fund, which holds a variety of names tied to discretionary consumer spending,  Read more 

Bull Case

Consumer confidence has been strong, and the job market continues to improve.
This ETF offers much more of a mid-cap tilt than do other consumer discretionary ETFs. As such, we believe 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 consumer spending that is stable to modestly higher in 2015, fueled by slow but steady employment growth and modest inflation. Read more 

Bear Case

Aside from being heavily dependent on disposable household income and consumer spending, the firms in this portfolio are also susceptible to changes in demographics and fickle consumer tastes.
This ETF meaningfully underperformed traditional cap-weighted consumer discretionary ETFs in 2011 and 2012 and more or less matched their performance in 2013. This fund did slightly outperform those funds in 2014.
This ETF's expense ratio is relatively high for a sector ETF. Read more 

This ETF's Index Is a Victim of Its Own Success 
Watch more 

Premium Membership

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