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ETFs to Bet on the Upcoming Holiday Season

MidWestOne Financial Group (MOFG) could be a stock to avoid from a technical perspective, as the firm is seeing unfavorable trends on the moving average crossover front

The National Retail Federation (NRF), the largest retail group in the United States, estimates holiday season sales in the range of $717.45-$720.89 billion, excluding automobile, gasoline and restaurants. This indicates a rise of 4.3%-4.8% from the last holiday season. These numbers are buoyed by a strongly performing economy. The average increase over the past five-years has been 3.9% (see: all the Consumer Discretionary ETFs here).

However, the rise will fall short of last year’s 5.3% spike in sales, which was a 12-year high. “Last year’s strong results were thanks to growing wages, stronger employment and higher confidence, complemented by anticipation of tax cuts that led consumers to spend more than expected,” NRF chief economist Jack Kleinhenz said. Holiday sales in 2017 were $687.87 billion.

These numbers are a relief for retailers as sales in this period could account for nearly 40% of their aggregate turnover. There is increasing innovation in the retail space with companies trying to speed up their deliveries and remodel their stores to attract consumers.

The unemployment level is at a near two-decade low and the consumer confidence was at an 18-year high in September. Due to low unemployment rates, the companies have to pay more incentives in the form of higher starting wages and other incentives like longer paid paternity and maternity leaves. The seasonal employment is expected to shoot up from 582500 jobs last year to the range of 585000-650000 jobs, per NRF (read: Consumer Confidence Soars to 18-Year High: 5 ETFs to Buy).

Per CNBC, Target plans to hire 120000 seasonal workers—a 20% increase from last year to fulfill online orders. The staring hourly wage would be $12 plus benefits of 10% discount on Target.com and 20% off on merchandise which includes fruits, vegetable and workout gear. It will also set aside rewards worth $2 million for its seasonal workers. Macy’s aims to hire 80000 people to handle online and store traffic (read: Big Tech Sector Shake-Up Put These Stocks and ETFs in Focus).

Amazon announced on Oct 3 a minimum wage of $15 per hour but abolishes monthly bonuses and stock award scheme. “Thanks to a healthy economy and strong consumer confidence, we believe that this holiday season will continue to reflect the growth we’ve seen over the past year,” NRF chief executive Matthew Shay said. Shay added, “While there is concern about the impacts of an escalating trade war, we are optimistic that the pace of economic activity will continue to increase through the end of the year.”  

Other companies differ in their estimates as AlixPartners estimates sales increase in the range of 3.1%-4.1%. Deloitte and PwC forecasts are near 5%.

With favorable estimates for the upcoming holiday season, the following ETFs could expect some pricing action:

Consumer Discretionary Select Sector SPDR Fund XLY

It tracks the Consumer Discretionary Select Sector Index. There are 65 securities in the fund’s basket. AUM is $15.66 billion and expense ratio is 0.13%. It has returned nearly 17% year to date.

Vanguard Consumer Discretionary ETF VCR

It tracks the MSCI US Investable Market Consumer Discretionary 25/50 Index and comprises 328 holdings. AUM is $3.17 billion and expense ratio is 0.10%. It has returned 14.5% year to date.

iShares US Consumer Services ETF IYC

It tracks the Dow Jones U.S. Consumer Services Index and comprises 169 holdings. AUM is $973.3 million and expense ratio is 0.43%.


It tracks the S&P Retail Select Industry Index. There are 96 holdings in the fund’s pool. AUM is $704.4 million and expense ratio is 0.35%. It has returned 9.8% year to date.

Fidelity MSCI Consumer Discretionary Index ETF FDIS

It tracks the MSCI USA IMI Consumer Discretionary Index and comprises 338 holdings. AUM is $703 million and expense ratio is 0.08%. It has returned 15.4% year to date.

Amplify Online Retail ETF IBUY

It tracks the EQM Online Retail Index and comprises 39 holdings. AUM is $529.1 million and expense ratio is 0.65%. It has returned 21.2% year to date.

First Trust Consumer Discretionary AlphaDEX Fund FXD

It tracks the StrataQuant Consumer Discretionary Index and comprises 110 holdings. AUM is $421 million and expense ratio is 0.63%. It has returned 2.3% year to date.

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FID-CON DIS (FDIS): ETF Research Reports
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ISHARS-US CN CY (IYC): ETF Research Reports
FT-CONSUMR DIS (FXD): ETF Research Reports
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