ETF Trends CEO Tom Lydon appeared on CNBC’s Halftime Report on Monday, joining ‘ETF Edge’ segment host Bob Pisani and Christian Magoon, Founder and CEO of Amplify ETFs, to discuss the latest trends in the retail ETF space.
The CNBC TV segment discussion continued on the expanded online version of ‘ETF Edge’ at 1pm ET, which also included Stuart Thomas of Precidian.
After taking a hit over the past few months, retail ETFs are catching a breather after the Trump administration announced a deal with Mexico to dodge tariffs aimed at the U.S. neighbor. As of 3pm ET Monday, the SPDR S&P Retail (XRT) is up 0.79%, VanEck Vectors Retail (RTH) is up 1.57%, and Amplify Online Retail ETF (IBUY) is up 1.58%.
While dodging Mexico tariffs is good sign for retail, the broader picture has influences to keep a close eye on.
“There’s not much traffic at the big boxes,” Lydon said. “More and more we’re using online purchases. I know Amazon boxes are showing up at my house all the time. I think this trend is continuing.”
One positive note in retail, according to Lydon, is auto buying.
“We’re seeing more auto buyers that are falling into this retail index,” he said. “Retail buying of cars is one of the bright spots in the retail index.”
Retail vs Online
While in-store retail faces headwinds, Magoon is placing his bets on online retailers through its Amplify Online Retail ETF (IBUY), which is up 18.16% year-to-date as of June 10, 2019.
“We think it’s clicks over bricks,” Magoon said.
“IBUY has been out for a little over 3 years, during that time it’s delivered about a 95% return,” Magoon said. “This is where the growth is happening. It’s moving from brick and mortar in-store visits to online. It’s not just happening in the U.S., it’s happening around the world. Growth is about 20%, on average, in the online retail space.”
Market Cap vs Equal Cap
Investors debating market cap vs equal cap can look to how retail ETFs are weighted:
- VanEck Vectors Retail ETF (RTH): Market-cap weighing
- SPDR S&P Retail ETF (XRT): Equal weighting
- Amplify Online Retail ETF (IBUY): Equal weighting
Lydon added that investors can look to the ProShares Long Online/Short Stores ETF (CLIX) which takes into account the changing retail landscape and growth of online sales.
“The index works by combining two specialized retail indexes into one,” according to ProShares. “It is 100% long the ProShares Online Retail Index, which tracks retailers that primarily sell online or through other non-store channels, and 50% short the Solactive-ProShares Bricks and Mortar Retail Store Index that brings together traditional in-store retailers. The positions are rebalanced monthly.”
Magoon thinks the approach is smart. “There is sentiment in the brick and mortar that goes way too far over,” he said. “CLIX shorts it and has profited at times from it.”
Learn more about retain trends in our Retail Section.