The SPDR S&P Retail ETF (NYSEArca: XRT) has lagged broader benchmarks this year, slumping more than 6% over the past month. That performance could spell trouble for XRT and rival retail exchange traded funds because this is the time of year these funds typically rise.
Morgan Stanley projects a 1.2% growth in sales this year, compared to 2.8% the previous year. Rivals to XRT include the Market Vectors Retail ETF (NYSEArca: RTH) and the PowerShares Dynamic Retail Portfolio (NYSEArca: PMR).
RTH covers the 25 largest U.S. companies involved in retail distribution, wholesalers, on-line, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. Top components include Amazon (NasdaqGS: AMZN), Home Depot (NYSE: HD) and Wal-Mart (NYSE: WMT).
XRT “peaked relative to the market in April although its chart shows a trading range in the first half of the year (see Chart 1). It fell with the market over the summer, but unlike the Standard & Poor’s 500 its chart did not show much of a September-October rally. Recall that the S&P 500 put together a six-week winning streak that ended with last week’s pullback. The index came very close to wiping out its entire summer swoon,” reports Michael Kahn for Barron’s.
PMR follows a factor-based index, which weights components based on price momentum, earnings momentum, quality, management action and value. Top holdings include O’Reilly Automotives (NasdaqGS: ORLY), L Brands (NYSE: LB) and Costco Wholesale (NasdaqGS: COST).