As Christmas shopping comes to an end, companies within the retail and consumer goods industries will be closing shop for the one day of the year. Following a large number of busy shopping sprees, the consumer discretionary and consumer staple sectors have predominantly successful Q4s in previous years. This year has not to been the case.
2018 saw the worst foot traffic for Christmas shopping since the financial crisis in 2008. Whilst the numbers of physical shoppers was only 0.1 per cent lower than the same period in 2017, this figure was down 7.6 per cent from the previous year and 2.5 per cent lower than the year before that, according to Yahoo.
Consumer discretionary are goods which are non-essential but are desirable such as clothes and leisure. Individuals will buy these products depending on the available income left over after essential payments. Consumer staples are the more essential goods such as food, drinks and household items.
For the last decade consumer discretionary and consumer staple ETFs have performed rather well, having positive YTD returns following successful Q4 periods in the run up to Christmas. But with regular disruptive Brexit news and a falling Pound, both sectors have had an underwhelming 2018.
For the consumer staple sector, the essential goods, the SPDR MSCI Europe Consumer Staples UCITS ETF (CSTP) tracks the European Consumer Staples Index. The CSTP had a positive performance in the middle third of 2018, but quickly slumped after September.
CSTP’s YTD Return 2018
Source: Just ETF
CSTP’s year-to-date return is -6.19 per cent, significantly lower than the positive 12.16 per cent returns at the same point in 2017 and 14.91 per cent in 2016.
For the consumer discretionary sector, the non-essential goods, the SPDR MSCI Europe Consumer Discretionary UCITS ETF (CDIS) tracks the European Consumer Discretionary Index. The ETF faced a slide for the majority of H2.
CDIS’s YTD Return 2018
Source: Just ETF
Sharing similarities with CSPT, the CDIS has YTD returns of -13.03 per cent, significantly lower than the same point in 2017 with 14.35 per cent and 2016 with 15.31 per cent.
It will be interesting to see how these sectors perform in Q1 of next year and especially after the Brexit deadline in March.