How Jolly Will Holiday Shopping Be for Retail ETFs? | ETF Trends

The holiday shopping season always shines a light on retail equities and the related exchange traded funds, but experienced investors know that these assets usually move early in the following year when fourth-quarter earnings are reported.

Still, there are ways for investors to anticipate how funds such as the VanEck Vectors Retail ETF (RTH) could perform early in 2022. For example, there’s a seemingly never-ending stream of retail data for investors to consume.

However, the last two years of holiday shopping have been anything but standard, and this is something for investors to consider. While the 2021 holiday shopping season is more open than last year’s affair, investors and consumers are pondering the impact of COVID-19 due to the recent emergence of the omicron variant.

“Still, collective anxiety levels remain uncomfortably high as still-elevated levels of COVID-19 cases and deaths have kept the virus a central consideration for many households,” notes IHS Markit.

Omicron could compel some consumers to eschew brick-and-mortar stores this holiday season, but RTH splits the difference as it allocates more than 18% of its weight to Amazon (NASDAQ: AMZN) and several of its largest brick-and-mortar components, such as Home Depot (NYSE: HD) and Walmart (NYSE: WMT), have vibrant online operations of their own.

Understanding The Impact

“While it is difficult to gauge the long-term impacts of the pandemic, at present, it is clear that spending patterns continue to be heavily influenced by health considerations and related lifestyle choices such as more time at home for work, school, and pleasure,” adds IHS Markit. “Consumers have responded by spending more on groceries, sporting goods, home improvement, and anything they can purchase online.”

The $248.8 million RTH holds just 25 stocks, but it is levered to the aforementioned themes, potentially positioning for success this holiday season. Good news: The stickiness of pandemic shopping trends is also a positive for RTH.

“Overall, pandemic-induced shopping trends have been a net plus for the overall holiday retail outlook. We forecast that holiday retail sales this year will amount to $888 billion, or an increase of 16.6% above last year’s sales. This would easily be the strongest growth rate on record dating back to 1992. Even more impressive is that this comes on the heels of 8.3% growth last year, which was only bested by a 1999 holiday surge of 8.7%.,” concludes IHS Markit.

RTH allocates 74.6% of its weight to consumer discretionary stocks while consumer staples names account for 16.5% of the ETF.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.