This is the time of year when retail stocks and the related exchange traded funds receive additional attention. For aggressive, risk-tolerant traders, the Direxion Daily Retail Bull 3X ETF (NYSEArca: RETL) should be part of that conversation.
RETL, the dominant name among leveraged retail ETFs, looks to deliver triple the daily performance of the equally-weighted S&P Retail Select Industry Index.
Data bode particularly for online sales trends, which could boost a slew of retail ETFs, including RETL. The sales increase speaks to the obvious shift of consumer spending habits from brick-and-mortar retail to the convenience of online shopping as Adobe Analytics also reported that half of the $6.22 billion in sales came from mobile devices like smartphones. Furthermore, shoppers were more inclined to use their mobile devices to locate deals and make purchases.
“The fourth quarter is typically the most important time of year for retailers. While shoppers are looking forward to a parade of sales, investors in retail stocks eagerly anticipate projections and announcements of which companies showed the strongest year-over-year growth,” said Direxion in a recent research note. “Though this seasonal trend is well-known by investors, it’s not unusual to see retailers outperform in November as the holiday season approaches. And that looked to be the case again in early November.”
Positive Trends in Consumer Spending
The spate of bankruptcies from brick-and-mortar retails stores could be spooking investors as companies like Sears Holdings filed for bankruptcy protection last month after 125 years in business. However, some data points could support an uptick in consumer spending.
Still, traders should note that some of the positive catalysts that previously boosted consumer spending are fading.
“Since late 2017, and arguably since the 2016 election, the market has been relying on tax cuts and deregulation to spur income growth and carry productivity past some costly trade wars,” said Direxion. “If the trickle-down in the cuts have plateaued, and workers don’t have the cash to throw around that some the market is expecting, it might just be a longer, colder winter for retail.”
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