Retail is a cyclical sector that plays on the opposite side of defensive sector such as utilities. The defensive sectors are popular during so-called “risk-off” climates, so when the retail segment of the market is strong, it implies that investors are taking on a bit of risk , or “risk-on”.
However, the news is not all down. Dow Jones Newswires reports that the 18 retailers tracked by Thomson Reuters are expected to show 3.1% same-store sales growth for July. The figure compares with 4.8% growth last year.
“One question is — was July so good simply because of all the end-of-season clearance and promotional prices?” Michael Niemira, economist for the International Council of Shopping Centers said. “If that is the case, then we may still see a rather soft August, while consumers wait for the clearance in the beginning of September.”
SPDR S&P Retail ETF
Tisha Guerrero contributed to this article.