Visa and MasterCard are not among the holdings listed in the top consumer discretionary ETFs such as VCR and XRT........their holdings are just retail stores, not credit card processors.
But isn't it true that Visa and MasterCard are directly impacted by the level of consumer spending? Don't they get a small percent of each and every sale or transaction?
Now look........consumer discretionary stocks have significantly outperformed the S&P 500 over the past several years......
And they now trade at fluffy high valuations, and this is not historically normal for the sector, which is very cyclical in nature.
Historically speaking, ETFs like VCR and XRT are very likely to underperform in the next few years. Would you agree with that statement?
I'm not saying they won't go up,but they probably won't go up as fast as the S&P500, and therefore it makes no sense to invest in them.
Now.....would you say the same is true for Visa and MasterCard? Are they poised to underperform?
I might argue that they can still perform well, given other factors and trends that affect them.
There is a growing amount of transactions being done online.
85 percent of the world's transactions are still in cash, so there's a lot of room for growth, not so much in the U.S., but in foreign parts of the world, (which is particularly good for MasterCard which has more international exposure than Visa.)
So I'm thinking the rate of growth and adoption in unsaturated markets will allow MasterCard and Visa to perform well despite the likely slowdown in consumer spending among Americans.
Your thoughts? Would you agree with this analysis?
