S&P 500 Consumer Discretionary: Unlocking the Power of the Sector

The S&P 500 Consumer Discretionary sector, or consumer-oriented businesses which cater to people’s needs and hobbies, has taken center stage within the market. Boasting a total market capitalization of $3 trillion, it’s no wonder this sector remains integral to the success of many investors. What sets this sector apart from so many others is its ability to capitalize on the changing consumer landscape. The S&P 500 consumer discretionary sector includes industries such as media, retail, food & beverage, entertainment, luxury goods, hotels, and travel, all of which have adapted and grown during the COVID-19 pandemic to meet the needs of a drastically changed consumer population. As one of the largest sectors in the S&P 500, this sector has been able to capitalize on the changing consumer habits, as well as increased demand due to the work-from-home shift, providing stability to a market in flux. While the sector as a whole has seen a strong recovery in the recent months due to the recovery of the global economy, some subsectors are likely to benefit more than others going forward. On the retail side, e-commerce and brick-and-mortar stores have seen marked increases in revenue in recent months, mirroring customer habits that are here to stay. Online shopping is expected to increase further in 2021, and within the brick-and-mortar retail sector, discount stores are predicted to take the lead. The media industry is also anticipated to grow in the coming months, fueled by an increased demand for consumer discretionary content. Media companies such as Disney, NBC Universal, and ViacomCBS are expected to gain from the ad revenue generated by streaming services as well as the booming subscription industry. The luxury goods sector has increased in demand as well. People have continued to purchase items such as high-end jewelry, handbags, and clothing during the pandemic, often as an outlet for stress relief. The industry is expected to grow in 2021 and beyond, as the segment is less dependent on changes in consumer sentiment. The travel industry has been hit particularly hard by the pandemic, but is expected to recover strongly in the longer-term. Within the travel segment, air travel is expected to take the lead, with a focus on leisure rather than business travel. The S&P 500 Consumer Discretionary sector remains key to the success of many investors, as it offers an attractive combination of stability and returns. The sector looks set to benefit from consumer habits that have changed during the pandemic, as well as longer-term stability found within the luxury goods and travel segments. As the consumer landscape evolves, this sector could potentially hold the key to an investor’s long-term success.