Holding shares of Amazon.com Inc. (NASDAQ:AMZN) continues to prove beneficial for plenty of exchange-traded funds, particularly consumer discretionary ETFs. The consumer discretionary sector, the fourth-largest sector weight in the S&P 500, is one of this year's best-performing sectors and Amazon is a big reason.

XLY: From A To Z With Amazon

Really. Amazon is a BIG reason why discretionary ETFs are surging. For example, the Consumer Discretionary Select Sector SPDR (NYSE:XLY) is up 10.6 percent year-to-date and is one of the best-performing members of the sector SPDR suite. Thank Amazon for that. Only Apple Inc. (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT) are bigger members of the S&P 500 than Amazon.

The Amazon effect on cap-weighted consumer discretionary ETFs, such as XLY, is pronounced. XLY allocates 14.6 percent of its weight to Amazon, about double the weight assigned to the ETF's second-largest holding, Dow component Home Depot Inc (NYSE:HD).

Even with Amazon reaching new highs on almost daily basis, some analysts are skeptical regarding XLY's fortunes. In a recent research piece, AltaVista Research tagged XLY with an underweight rating. AltaVista's underweight rating implies below average appreciation potential and a sector trading at lofty valuations and/or is home to stocks with slack fundamentals.

In the case of XLY and the consumer discretionary sector, it is likely valuation prompting AltaVista's uninspiring underweight rating on XLY. The research firm's 2017 price-to-earnings estimates on XLY is about 10 percent above the estimate on the S&P 500.

Some data points indicate investors are enthusiastic about XLY and continue using the ETF as a proxy for Amazon's high-priced shares. The ETF's shares outstanding tally is up 15 percent over the past year, but short interest in the fund is just 7 percent, according to AltaVista data. XLY's short interest of 7 percent is one of the lowest among the sector SPDR ETFs.

The Political Influence

There are other factors to consider with XLY, and some stem from Capitol Hill.

“This sector may be especially sensitive to plans for tax reform: individual tax cuts would boost consumers but a border adjustment tax could hit retailers — who make up almost half of the index--particularly hard,” said AltaVista. In any event, shares remain richly valued in our view, both in their own right and compared to the S&P 500, and the sector is trading at the top of its P/E range of the last few year.”