The broader consumer discretionary sector has been solid to start 2017 and there are signs once downtrodden retailers are on the mend as well.
For example, the SPDR S&P Retail ETF (NYSEArca: XRT), the largest dedicated retail exchange traded fund, jumped more than 2% last week. So did the VanEck Vectors Retail ETF (NYSEArca: RTH) and that ETF is now up nearly 3% year-to-date.
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.
“The broader macroeconomic trends are quite bullish for retail names, said Gina Sanchez, CEO of Chantico Global. Citing economics research firm Oxford Economics, Sanchez said the economy is going to continue to expand this year. Retail sales can be viewed as a way to gauge economic health,” reports CNBC.
Other consumer discretionary and retail ETFs have been thriving, namely those with heavy tilts toward e-commerce names.
The trend away from traditional department stores and apparel retailers to online shopping destinations should benefit the Amplify Online Retail ETF (NasdaqGM: IBUY), which debuted last year. IBUY, which is comprised of global companies that generate at least 70% of revenue from online or virtual sales, has been one of the best-performing retail ETFs since its inception.
IBUY provides exposure to many familiar online names, such as WayFair Inc (NYSE: W), Etsy (NasdaqGS: ETSY), FTD Companies (NasdaqGS: FTD), Overstock Com Inc (NasdaqGS: OSTK) and Priceline (NasdaqGS: PCLN).
“Retailers had been under pressure with the potential for a proposed tax plan by congressional Republicans to negatively impact the group. Such a plan would more heavily tax retailers that source their goods from abroad,” according to CNBC. “However, President Donald Trump said in a recent interview with The Wall Street Journal the tax plan appears “too complicated,” raising uncertainty about its prospects.”
Investors are displaying some enthusiasm for XRT’s rebound prospects as the ETF has added nearly $470 million in new assets since the start of this year.
For more news and strategy on the Retail ETF market, visit our Retail category.