Consumer Resilience Creates Opportunities in the Retail Sector

Inflation isn’t stopping consumers from spending this holiday season. And that means retail numbers could be much better than anticipated. That said, traders may want to err on the side of bullishness for retail sector plays in 2024 when final shopping numbers are revealed.

The anticipation of lower interest rates in 2024 could also be feeding into consumer optimism ahead of 2024. As such, more consumers are willing to spend now and pay later. That’s especially so if the Fed keeps its rate cut agenda in place.

“Many companies in the retail sector are placing significant bets on the enduring resilience of consumers as we approach the close of 2023,” noted Eat Shop Surf, adding that a key metric known as the “RSM US Middle Market Business Index, our gauge of economic sentiment for midsize companies, recently revealed that 60% of respondents are bullish about the next six months.”

As mentioned, the macroeconomic effects of inflation hasn’t made a profound shift in consumer spending habits. Part of that confidence stems from a strong labor market highlighted by low unemployment.

“The unwavering labor market has played a pivotal role in shoring up consumer confidence, ensuring that cash continues to flow into the pockets of the American populace,” Eat Shop Surf added.

When final retail numbers come out, it could be a boon for retail sector ETFs. Traders looking to add leverage on their bullish bets may want to look at the Direxion Daily Retail Bull 3X ETF (RETL). The fund seeks daily investment results of 300% of the daily performance of the S&P Retail Select Industry Index.

Internet ETF Jumps 40%

Online shopping continues to be a prime method of paying for goods and services even after the COVID-19 pandemic. This includes holiday shopping, which is translating into strength for the Direxion Daily Dow Jones Internet Bull 3X Shares (WEBL). The ETF is up almost 40% the past month.

WEBL includes Amazon, which has also been benefiting from the increased online shopping. Per its fund description, this ETF seeks 300% of the daily performance of the Dow Jones Internet Composite Index. Like RETL, the extra leverage allows traders to maximize their gains without having to resort to borrowing trading capital from a margin account.

As mentioned, online shopping continues to be the preferred method versus brick-and-mortar stores even after social distancing measures have been lifted following the pandemic. A CNBC All-America Economic Survey found that 57% of Americans preferred online shopping for Christmas gifts this holiday season.

For more news, information, and analysis, visit the Leveraged & Inverse Channel.