ETF Research and Analysis

by Robert Goldsborough
First Trust Consumer Discretionary AlphaDEX FXD offers exposure to firms that largely depend on discretionary consumer spending. This strategic-beta exchange-traded fund holds 131 firms. Investors interested in this ETF   Read more 

Bull Case

The job market and housing market have continued to improve, and gas prices have been declining.
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 but meaningfully trailed it in 2015 through Sept. 14, 2015.
This ETF's expense ratio is relatively high for a sector ETF. Read more 

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