ETFs That Can Benefit From the Holiday Season

The two primary types of ETFs that may benefit from strong consumer spending during the holidays are consumer discretionary sector ETFs and retail ETFs.

Here is what you need to know about these sectors and examples of stocks that they hold. 

ETFs That Can Benefit From the Holiday Season 

While there is no guarantee that certain stocks or sectors may perform better than others during or immediately following the holidays, the consumer discretionary sector or the retail subsector can benefit from strong consumer spending. Since the behavior of consumers can be difficult to predict, a diversified ETF can help to reduce market risk associated with cyclical investments.

What Are Consumer Discretionary Stocks? 

Consumer discretionary stocks are equity securities of companies involved in the production of non-essential goods and services. The consumer discretionary sector includes industries, such as auto manufacturing, consumer retail, hotels, and the travel and leisure industries. 

Also known as consumer cyclical stocks, consumer discretionary stocks tend to be sensitive to economic cycles. For example, when the economy is growing and consumer sentiment is generally positive, consumers tend to spend more on goods and services they want but may not need, whereas they may spend less on these items in a slowing economy. 

Examples of consumer discretionary stocks include: 

  • Amazon Inc. (AMZN) 
  • Tesla Inc. (TSLA) 
  • Home Depot (HD) 
  • Walt Disney (DIS) 
  • Nike Inc. (NKE) 

Top Consumer Discretionary ETFs by AUM 

The top consumer discretionary ETFs, as measured by assets under management, are: 

What Are Retail Stocks? 

Retail stocks are equity securities of companies that are involved in the production or sale of retail goods, particularly items that consumers want but may not need. Retail is a subsector of the consumer discretionary sector and may include industries such as apparel, home goods, and health and beauty. 

Like some other consumer discretionary industries, retail tends to be seasonal, meaning many retailers generate a significant part of their annual sales during the holiday season. Although November and December tend to be stronger months than others, the back-to-school season can also produce significant sales. 

Examples of retail stocks include: 

  • Gap Inc. (GPS) 
  • Sally Beauty Holdings (SBH) 
  • Etsy Inc. (ETSY) 
  • Burlington Stores Inc. (BURL) 
  • Chewy Inc. (CHWY) 

Top Retail ETFs by AUM 

The top retail ETFs, as measured by assets under management, are: 

Consumer Sentiment and Consumer Spending 

Investors should keep in mind that consumer discretionary spending can be influenced by psychology in addition to economic conditions. For example, consumer sentiment, which is a measure of how consumers are feeling about the economy at a certain point in time, is a leading economic indicator.

Therefore, no matter the health of the economy, consumers’ attitudes about economic conditions can affect their spending habits. Since consumer spending represents approximately two-thirds of economic activity in the U.S., consumer sentiment is a closely watched economic indicator.

Some economists and investors follow the Conference Board US Consumer Confidence Index or the University of Michigan Sentiment Index, both of which provide periodic measures of consumer feelings about economic conditions and plans to make purchases. 

Bottom Line 

Investors looking for ETFs that can benefit from the holiday season may consider consumer discretionary sector ETFs or retail ETFs. Some retail stocks and ETFs may benefit when consumer spending is better than expected. However, it’s important to keep in mind that consumer stocks don’t automatically produce positive returns during or immediately after the holidays.


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