The SPDR S&P Retail ETF (NYSEArca: XRT), the largest dedicated retail exchange traded fund, and rival retail ETFs often enter the spotlight at this time of year with the holiday shopping season looming. However, 2016 could bring different dynamics to holiday shopping with the imminent presidential election and the possibility of the Federal Reserve raising interest rates in December.
Year-to-date, Amazon (NasdaqGS: AMZN) and Dow component Wal-Mart (NYSE: WMT) have recently helped XRT’s rival, the VanEck Vectors Retail ETF (NYSEArca: RTH), perform less poorly than XRT. XRT, an equal-weight ETF, has been plagued by slumping apparel retailers, among other corners of the flailing retail industry.
With Amazon being one of the story stocks of 2016, RTH is primed to keep rolling, but XRT is reversing its fortunes for the better thanks to rebounding department store names. That scenario is bolstering the ETF’s technical outlook.
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“The beginning of the Christmas holiday season (November) has been a good time to buy the group, and the post-shopping season (January) has been a good time to avoid (or be short) the sector,” reports ETF Daily News. “XRT has outperformed the market in November with an average gain of 2.26% in that month alone. In addition, XRT has lost an average of 1.87% during January in the period examined (2006, 2009 to 2015). December has been a relatively neutral month for retail stocks compared to the S&P 500.”
[related_stories]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. The ETF’s exposure to traditional department stores is light.
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Market analysts argued that department stores have experienced declining revenue on lower foot traffic as online stores like Amazon, which recently made an aggressive push into apparel and fashion, have started to take significant market share from traditional brick-and-mortar stores, reports Susaznne Kapner for the Wall Street Journal.
“If you’re bullish on the 2016 holiday shopping season, history says to buy retail stocks in late October or early November. And be sure to exit your trade by the end of November or December,” according to ETF Daily News.
For more news and strategy on the Retail ETF market, visit our Retail category.
SPDR S&P Retail ETF
