Holiday Retail Spending Could Impact This Pair of ETFs

The expectation of a less-than-stellar holiday spending year may not pave the way for trading opportunities in bullish retail stocks. However, there are opportunities in leveraged ETFs that could allow short-term traders to take advantage of the holiday season.

Retail names may not prosper at levels in years past due to high inflation. But financials are worth a look. Any spending means consumers need to pay for items. And that means opportunities in financial names.

“This year’s Black Friday might not have been marked by stories of mobs of shoppers like in past years, but it made up for that drama digitally,” the Wall Street Journal reported, noting that in-store retail sales during Black Friday were up “1.1% over last year, according to Mastercard SpendingPulse, and e-commerce sales were up 8.5%. That might help give a second wind to digital payments stocks whose shares have struggled at times in the postpandemic era.”

For traders, one ETF to consider is the Direxion Daily Financial Bull 3X ETF (FAS). It provides 300% exposure to the daily performance of the Russell 1000 Financial Services Index. The index is a subset of the Russell 1000 Index that measures the performance of the securities classified in the financial services sector of the large-cap  U.S. equity market.

Buying the Dips on Lukewarm Sales?

As consumer spending data and retail sales flood the markets after the holidays, it could be an opportunity now to buy the dips in the Direxion Daily Retail Bull 3X ETF (RETL), which seeks daily investment results of 300% of the daily performance of the S&P Retail Select Industry Index. Of course, Christmas holiday spending could surprise the market, especially if consumers are willing to spend on the anticipation that rates will fall in the new year.

“It is not surprising to see holiday sales growth returning to pre-pandemic levels,” National Retail Federation (NRF) President and CEO Matthew Shay said in a press release. “Overall household finances remain in good shape and will continue to support the consumer’s ability to spend.”

“Consumers remain in the driver’s seat, and are resilient despite headwinds of inflation, higher gas prices, stringent credit conditions and elevated interest rates,” NRF Chief Economist Jack Kleinhenz said. “We expect spending to continue through the end of the year on a range of items and experiences, but at a slower pace. Solid job and wage growth will be contributing factors this holiday season, and consumers will be looking for deals and discounts to stretch their dollars.”

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