The Thanksgiving holiday arrives next week and with comes a shortened trading week. While the Thanksgiving trading week is abbreviated, the S&P 500 historically performs well around the holiday and there are sector-level opportunities for traders of exchange traded funds to consider.
“Thanksgiving-week outperformance has been due to the day before Thanksgiving and the day after. The Wednesday before Thanksgiving has been positive 80% of the time, averaging a gain of 0.31%. The day after Thanksgiving has averaged a 0.27% return over the past 50 years, while being positive 70% of the time,” according to Schaeffer’s Investment Research.
Historical data suggest the aerospace and defense and retail sectors are among the groups that perform well around the Thanksgiving holiday. If that scenario holds true, it could bring needed relief for the SPDR S&P Retail ETF (NYSEArca: XRT), the largest retail ETF, which has been struggling for much of this year.
Adding to the concern for an ETF such as XRT is the fact that the broader consumer discretionary sector, which includes retail, is in the middle of its seasonally strong period. In fact, there are another six or seven weeks remaining in the strongest period of the year for the discretionary sector, but XRT is languishing. The broader consumer discretionary sector is sporting a double-digit year-to-date gain.
XRT features exposure to the following retail industries: Apparel Retail, Automotive Retail, Computer & Electronic Retail, Department Stores, Drug Retail, Food Retailers, General Merchandise Stores, Hypermarkets & Super Centers, Internet & Direct Marketing Retail, and Specialty Stores.
Related: Sector ETF Plays to Keep on Your Radar Ahead
Among the S&P 500 members with penchants for Thanksgiving week bullishness are nine retail stocks, including some XRT constituents, according to Schaeffer’s data.
As for aerospace and defense, ETFs, such as the iShares U.S. Aerospace & Defense ETF (BATS: ITA), PowerShares Aerospace & Defense Portfolio (NYSEArca: PPA) and other aerospace and defense ETFs are already among this year’s best-performing industry funds.
Other potential catalysts for aerospace ETFs include include, renewed airline pricing power evidenced by higher ticket prices, and more fees paid per traveler, increased airline profitability, new aircraft program launches and continued demand for aircraft models and technology.
For more information on the consumer sector, visit our consumer discretionary category.