Consumer Disc. Stocks: 23 January 2014

XLY is an exchange traded fund (ETF) that tracks consumer discretionary stocks in the US. The consumer discretionary sector typically includes companies with strong brands, an international presence, good cash flow characteristics, etc... all the qualities that fund managers typically look for when making an investment. Some of the larger names in XLY include Amazon, Comcast, Walt Disney, Home Depot, MacDonald's, Time Warner, Ford and Starbucks.

This sector has led the stock market all the way up since the 2009 lows and has doubled in the past two years alone. Now, for the first time in a long time, XLY has started to lag the S&P 500. When former market leaders (XLY) start underperforming relative to the broader market, the stock market is signalling a major trend change is underway. We are starting to see the smart money head for the exits and they are hoping to get there before the crowd.


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