Why this might be 2014's most pivotal week for financial releases

Part 7
Why this might be 2014's most pivotal week for financial releases (Part 7 of 7)

Will consumer confidence boost retailers like Amazon in April?

Consumer confidence

The Conference Board will release the April Consumer Confidence Index report on Tuesday, April 29.

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What is the Consumer Confidence Survey?

The Consumer Confidence Survey is a monthly report issued by the Conference Board that assesses how consumers rate current economic conditions. The survey assesses prevailing business conditions and likely developments for the months ahead. The monthly report also discusses consumer attitudes and buying intentions. The survey is based on a probability-design random sample, and it’s conducted for the Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch.

Highlights from the March release

  • Consumer sentiment in March rose to a six-year high, moving from 78.3 in February to 82.3 in March.
  • The increase was more due to what respondents expected in the next six months rather than present conditions.
  • More importantly, respondents didn’t think the current job market was favorable, with 33% of respondents saying jobs are “hard to get,” an increase of 0.6% over last month.
  • However, consumers were more upbeat about job prospects and the prospects for the overall economy over the next six months.
  • Income growth over the next six months, however, remained a concern for many respondents.

What to look for from the April release

Consumer confidence about jobs will be very important in the April release. While wage growth is unlikely to improve, job creation will be essential. Consumers’ assessment of their job prospects determines spending patterns. Consumer spending accounts for over two-thirds of the economy, and when people have jobs, they’re more likely to splurge. So consumer spending determines the level of GDP and economic growth.

Investors can benefit from expected future increases in consumer spending by investing in the consumer discretionary space. ETFs with exposure to the sector include the Market Vectors Retail ETF (RTH), which tracks the Market Vectors US Listed Retail 25 Index. The index is designed to track the overall performance of the 25 largest publicly listed retailers in the U.S. The top holdings in the ETF include Amazon.com (AMZN), with 9.77% of assets, and Wal-Mart Stores Inc. (WMT), with 10.63% of assets.

However, increasing consumer sentiment may have the opposite effect on bond investors, as an increase in GDP growth usually means higher interest rates. This would impact ETFs that invest in fixed income securities—like the Vanguard Total Bond Market ETF (BND), which primarily invests in investment-grade bonds in the U.S. with a maturity in excess of one year, or the Core Total U.S. Bond Market ETF (AGG), which tracks the Barclays U.S. Aggregate Bond Index.

To learn more about important releases that affect your fixed income investments, check out Market Realist’s Fixed Income ETFs page.

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