Historically speaking, the consumer sector tends to begin its favorable period near the end of September and typically remains strong until the beginning of June in the following year. Back-to-school and holiday spending combined with the effects of the Best Six Months is the most likely driving force behind this seasonality. More recently, the rising stock market and continued housing and labor market gains (although somewhat sluggish) have given the sector a boost.
Over the last 15 years this trade has produced an average 10.8% gain. Last year’s two ETF trades based upon this seasonality returned an average of 15.9%. Like past years, a two-pronged approach to trade this seasonality will be utilized. We will look to add two consumer related ETFs to the portfolio that provide exposure to discretionary and non-discretionary spending on pullbacks over the next few weeks.
By Christopher Mistal