Strong Consumer Confidence Going into Holiday Season to Support Consumer ETFs
This article was originally published on ETFTrends.com.
Strong domestic macroeconomic indicators may point to a jolly holiday shopping season and a favorable outlook for consumer sector-specific ETFs.
Unemployment levels are near four decade lows and a consumer confidence reading is at a 20-year high, illustrating a consumer backdrop that is the best it has been in decades, CNBC reports.
Last year was the best holiday shopping season in three years for companies, and Matthew Boss, J.P. Morgan's equity research analyst focusing on retailing, argued that the strengthening U.S. consumer as the year progressed could bode well for sales this year as well.
"Management teams are telling us consumers are trading up within stores, particularly in department stores. Discounting is reduced. We think the consumer is really showing a trade-up dynamic and that will be key to this holiday season," Boss told CNBC. "National brands, name brands, will be able to do full price selling rather than mark-down. Retailers can win on the top line and margins."
Industry-wide volatility could continue
However, potential investors should keep in mind that volatility remains an ongoing risk. Boss warned that company-specific and industry-wide volatility could continue.
The most glaring macroeconomic overhang continues to be the trade war between the U.S. and China.
"These stocks and the volatility are tied to some dynamics that are out of their control," Boss added.
Nevertheless, investors who believe that the optimism among U.S. consumers could translate to improved sales during the upcoming holiday season can look to consumer sector-related ETFs. For example, one can look to broad consumer discretionary exposure through something like the Consumer Discretionary Select Sector SPDR (XLY) , Vanguard Consumer Discretionary (VCR) and Fidelity MSCI Consumer Discretionary Index (FDIS) .
For more focused exposure on the retail space, investors can use the SPDR S&P Retail ETF (XRT) and the VanEck Vectors Retail ETF (RTH) to access large retail stores.
Alternatively, given the rising importance of online retail or e-commerce in a digital age, the Amplify Online Retail ETF (IBUY) and ProShares Online Retail ETF (ONLN) provide exposure to online retail outlets.
For more information on the consumer sector, visit our consumer discretionary category.
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