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Be Mindful About Retail ETF Investing This Holiday Season

The late October-December period embraces the key holiday season, which puts the spotlight on the performance of retailers. As loads of sales-boosting events — Halloween, Thanksgiving, Black Friday, Cyber Monday and Christmas — fall in this timeframe, the sector generally sees a sales boost.

Investors are more watchful about the retail sector’s performance this year as inflationary pressure is rife, this may weigh on consumers’ buying spree. However, strong job and income growth, excess savings and available credit are tailwinds for the retail sector. The third-quarter Employment Cost Index from the Bureau of Labor Statistics, which measures wages and salaries, was up 5% year over year, NRF noted.

Holiday Spending Decent

As a result, holiday spending is expected to be healthy even with recent inflationary challenges, as NRF forecasts that holiday retail sales during November and December will increase between 6% and 8% over 2021 to between $942.6 billion and $960.4 billion.

Adobe Analytics indicated that $5.29 billion was spent online on Thanksgiving Thursday, up 2.9% year over year, and ahead of the $5.1 billion Adobe initially said it was expecting for the day. Adobe also said that online sales for Black Friday are expected to top $9 billion, a record for the industry while Cyber Monday is expected to garner $11.2 billion. NRF said that 60% of holiday shoppers started browsing and buying by early November.

Travel Industry Upbeat

Travel during the upcoming holiday season is expected to rebound greatly despite high inflation. After two years of travel bans, restrictions and lockdowns, Americans are set to hit the road. Thanksgiving and Christmas are normally two of the most traveled holidays in the fourth quarter.

According to Hopper's 2022 Holiday Travel Outlook released in September, the average price of a domestic plane ticket is $463 for Christmas travel. Christmas airfares are currently averaging 31% higher than 2019, and 39% higher than last year (read: Time to Buy Leisure & Travel ETFs?).

Which Retail Stock & ETF to Bet On?

Walmart WMT grabbed the top spot among shoppers who are searching online for Black Friday discounts, according to data from Captify, quoted on CNBC. Amazon took that spot last year. Searches for Black Friday discounts on Walmart skyrocketed 386% year over year, brushing aside e-Commerce behemoth Amazon.

This year, the world’s largest e-commerce company ranked fourth, behind Target TGT, and Kohl’s KSS, respectively, per the source. Wal-Mart takes 8% of the fund VanEck Retail ETF (RTH) and Target takes 4% of the fund.

Against this backdrop, investors should not rely on every retail ETF. Below we highlight a few retail and consumer discretionary ETFs that should prove to be gainful in the coming days.

ETFs in Focus

SPDR S&P Retail ETF XRT – Up 4.2% Last Week

Invesco DWA Consumer Cyclicals Momentum ETF PEZ – Up 2.7% Last Week

Invesco S&P SmallCap Consumer Discretionary ETF PSCD – Up 2.6% Last Week

Global X Health & Wellness ETF BFIT – Up 2.5% Last week

VanEck Retail ETF RTH – Up 1.6% Last Week

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Target Corporation (TGT) : Free Stock Analysis Report

Kohl's Corporation (KSS) : Free Stock Analysis Report

Walmart Inc. (WMT) : Free Stock Analysis Report

SPDR S&P Retail ETF (XRT): ETF Research Reports

VanEck Retail ETF (RTH): ETF Research Reports

Invesco S&P SmallCap Consumer Discretionary ETF (PSCD): ETF Research Reports

Global X Funds Global X Health (BFIT): ETF Research Reports

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Zacks Investment Research