Tesla And Amazon Just Became A Problem For The Entire Discretionary Sector

When the economy is strong, consumer discretionary stocks usually sprint ahead. But in 2025, the sector's two heaviest runners—Tesla Inc. (NASDAQ:TSLA) and Amazon.com Inc. (NASDAQ:AMZN)—are slowing the entire race, masking a healthier picture underneath.

The Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY), which tracks top U.S. companies in autos, retail and leisure, has badly trailed the S&P 500 this year.

Instead of capturing consumers' strong appetite for spending, backed by record-high U.S. asset prices and lower interest rates, the sector is underperforming the broader market by one of the widest margins seen in the past 15 years.

Consumer Discretionary vs. Staples: An Unusual Market Picture

On social media platform X, Liz Ann Sonders, chief investment strategist at Charles Schwab, said both the consumer discretionary and staples sectors are the two worst-performing groups in the S&P 500, lagging the broader index by 12% and 11% year to date.

That kind of parallel weakness is rare: since 1996, the two sectors have moved in opposite directions in more than 70% of years.

“And even in years when they both lagged, they never both lagged by this much: in prior years, at least one of the two sectors limited its underperformance at under 6%,” she said.

Not A Sectorwide Problem—Just Two Dormant Giants

The discretionary sector's exceptional underperformance might be less about consumer fatigue and more about stock concentration.

Two companies—Amazon.com Inc. and Tesla Inc. —account for 42% of the XLY ETF, each weighing in at roughly 21%.

Amazon's stock is flat in 2025, while Tesla is up just 6%, meaning nearly half of the ETF's exposure is tied to low or modest returns.

Their combined contribution to XLY's year-to-date gain is roughly 2 percentage points, far below expectations for a sector that should be thriving in a strong economy.

By comparison, the pair make up only 5% of the S&P 500's total weight, so their drag on the broader market is minimal—but devastating inside discretionary.

Out of 50 stocks in XLY, 33 are up year-to-date and 17 are down, indicating that much of the sector is quietly performing well.

Equal Weight Tells A Stronger Story

If every stock in the consumer discretionary sector carried the same weight, investors would be seeing a far more upbeat picture.

The Invesco S&P 500 Equal Weight Consumer Discretionary ETF (NYSE:RSPD) is up 9.2% year to date, outperforming the cap-weighted XLY, which has gained only 7.7%.

This shows that beneath the surface, smaller and mid-sized companies in the discretionary sector are quietly delivering steadier, more broadly distributed gains than their larger peers.

In fact, the equal-weight version of the discretionary sector has performed almost in line with the broader market's equal-weight benchmark — the Invesco S&P 500 Equal Weight ETF (NYSE:RSP) — effectively erasing the sector's unusual 2025 underperformance once the dominance of Tesla and Amazon is stripped away.

Consumer discretionary stands out as one of the few sectors where equal-weight beats cap-weight, alongside energy and utilities.

Energy's equal-weight version outperformed by a stunning 7.6 percentage points, while utilities' equal-weight ETF edged out its cap-weighted rival by 0.8 points.

The Bottom Line

Tesla and Amazon's sluggish performance has turned the consumer discretionary sector into an unexpected laggard in 2025.

But peel back their dominance, and the picture looks brighter: most companies in the sector are actually performing about as well as the broader market once they're given equal footing.

In a year when Big Tech continues to steer index performance, the strength of equal-weight ETFs in sectors like discretionary, energy and utilities serves as a reminder—sometimes, the real health of the market lies in its breadth, not its biggest names.

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