Cyber Monday May Boost XRT

Last week’s Thanksgiving holiday kicked off the season of giving and buying.

Black Friday in the U.S. is the day after Thanksgiving and traditionally starts the Christmas shopping season. 

Many stores offer Black Friday discounts, with some opening late Thanksgiving night or early the following day to encourage a herd of shoppers. Then technology (and a wordsmith at the National Retail Federation) gave birth to Cyber Monday, the market term for e-commerce transactions on the Monday after Thanksgiving, when retailers encourage consumers to shop online by offering big discounts.  

As for ETF’s, the SPDR S&P Retail ETF (XRT) owns the companies that stand to gain the most from success on Black Friday and Cyber Monday.  

XRT’s Top Holdings: Sources of Holiday Gifts

At $63.46 per share on Nov. 24, XRT had over $569 million in assets under management. XRT trades an average of more than eight million shares daily and charges a 0.35% management fee. 

XRT top holdings include: 

Source: etf.com 

Many retailers experience the highest revenue and profit levels during the holiday season. Meanwhile, XRT’s price/earnings ratio of 12.08 is significantly below the SPY average of 21.42, indicating investors’ lack of faith in the retail sector.  

XRT Price: 2021 Peak, Range-bound 2022, 2023 

The five-year chart highlights XRT’s record high in late 2021 and the lackluster trading range over the past two years.

Source: etf.com

After falling to a pandemic-inspired $26.29 low in March 2020, XRT exploded to a record $104.31 high in November 2021, as seasonality during Black Friday and Cyber Monday and a recovery from the COVID-19 pandemic turbocharged consumer activity and retailer profits.

In 2023, XRT has traded in a $56.20 to $75.77 range. At $63.43 on Nov. 22, XRT is just below the range’s midpoint.

XRT Inflows Since the End of 3Q

The etf.com Fund Flow Tool shows net inflows of $278 million since the end of 2022 through Nov. 24, 2023. Meanwhile, seasonality has caused significant inflows since the end of the third quarter.

Roughly $260 million has flowed into XRT since the end of September 2023 through Nov. 24, 2023. The low P/E ratio and hopes for a robust holiday season have supported investments.  

XRT Year-End Peak Before Correction?

People spend the most during the holiday season. Expenditures begin around Thanksgiving and often halt suddenly after New Year’s Day. The holiday season bills arrive after the New Year’s Eve hangover wears off. Therefore, XRT will likely peak over the coming weeks and could suffer a correction in early 2024.  

XRT as a Critical Economic Indicator

The consumer drives economic growth. While the holiday season and New Year are a time for optimism, reality tends to settle in soon after midnight, Jan. 1.  

The highest interest rates in years, a record U.S. national debt, the wars in Ukraine and the Middle East and the uncertainty and division surrounding the 2024 U.S. election are reasons for extreme caution. Although XRT could rally over the coming weeks, 2024 could be when the consumer slows spending and retailers’ profits decline.  

Seasonality can be a powerful force, but the end of the 2023 holiday season will lead to uncertainty that tends to undermine confidence.