Buoyed by government stimulus and resurgent brick-and-mortar retailers, among other factors, the VanEck Vectors Retail ETF (RTH) is higher by 22.14% year-to-date.
A solid showing to be sure, but some market observers believe that retail stocks can continue their winning ways in the new year, indicating that RTH shouldn’t be abandoned simply because the holiday shopping season is drawing to a close.
“Supply-chain snafus and inflationary pressures may linger longer than expected for retailers in 2022. But momentum is on their side, and the trends will help boost retailers’ stock prices in the new year,” reports Logan Moore for Barron’s. “For starters, consumers have returned to malls, spending some of that excess savings from the pandemic, even as a renewed threat from Covid looms. And they now have an array of new shopping experiences and payment options.”
RTH, which turned 10 years old earlier this week, is home to 25 stocks. While that’s a concentrated lineup, that concentration could be advantageous for investors in 2022.
“Walmart (WMT) raised its fiscal 2022 U.S. same-store sales growth outlook, maintaining its strategy of keeping prices low as shoppers confront inflation. The company navigated supply-chain issues before the holidays this year by chartering its own ships, rerouting them to less-crowded ports, and hiring more workers,” according to Barron’s. “Home Depot (HD) and Lowe’s (LOW) will continue to benefit from the surge in home buying and renovation.”
Dow components Home Depot and Walmart combine for almost 22% of RTH’s weight. Lowe’s accounts for another 5.68%.
Interestingly, RTH’s “secret weapon” for 2022 upside could be Amazon (NASDAQ:AMZN), the ETF’s largest holding at a weight of 19%. That stock is a surprising 2021 laggard, returning just 5%, making RTH’s showing all the more impressive. That doesn’t mean that e-commerce is going away, however — quite the contrary.
“U.S. e-commerce sales are on track to exceed $1 trillion for the first time next year, as sales growth plateaus but total purchases remain far above pre-pandemic levels, according to a recent forecast by eMarketer. E-commerce sales grew by 32.4% between 2019 and 2020, reflecting the abrupt shift to online shopping, working and learning during first waves of the pandemic. The growth rate fell to an estimated 16.1% between 2020 and 2021 and is expected to remain near that level for the next two years,” notes S&P Global Market Intelligence.
For more news, information, and strategy, visit the Beyond Basic Beta Channel.
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.