Summary · why it matters
The Federal Reserve is expected to raise rates by a quarter-point at tomorrow's FOMC meeting, with markets pricing a 92% probability, up sharply from 59% a week ago, after August CPI held at 3.4% and crude oil prices spiked toward $100 a barrel. Higher rates squeeze consumer discretionary stocks through three channels: rising credit card APRs and 30-year mortgage rates cut disposable income, costlier corporate debt pressures credit-dependent businesses like homebuilders and automakers, and the 10-year Treasury yield at 5.025%, the highest since 2007, compresses equity growth valuations. Jefferies recently reported $528.3 million in weekly outflows from consumer discretionary ETFs as hike odds rose, though Goldman Sachs strategists noted the S&P 500 averaged 9% over the 12 months following the first hike of seven prior hiking cycles. Among the funds highlighted, State Street Consumer Discretionary Select Sector SPDR ETF XLY has $21.40 billion in assets under management across 47 companies, with Amazon at 24.91% weightage, Tesla at 17.75% and Home Depot at 5.31%, charging 8 basis points. iShares Global Consumer Discretionary ETF RXI holds $249 million in net assets across 131 global companies, with Amazon at 16.63%, Tesla at 6.80%, Home Depot at 4.36% and Alibaba at 4.33%, charging 37 basis points. ProShares Online Retail ETF ONLN has $59.5 million in net assets across 22 online retail stocks, with Amazon at 24.40% and Alibaba at 8.29%, charging 58 basis points, while VanEck Consumer Discretionary TruSector ETF TRUD holds $59.4 million in net assets with Amazon at 27.59%, Tesla at 6.72% and Home Depot at 2.01%, charging 16 basis points.
Alibaba Group Holding Ltd
Goldman Sachs Group Inc
Jefferies Financial Group Inc
The Home Depot Inc
State Street Corp
Tesla Inc