U.S. Retail ETFs Shine on Black Friday Despite Industry Caution

Kayra Reven

woman wearing black coat holding assorted color shopping bags on building

In a surprising turn of events, U.S. retail-focused exchange-traded funds (ETFs) demonstrated resilience on Black Friday, outpacing broader market indexes despite concerns about the holiday shopping season. While the S&P 500 index remained relatively unchanged, the Amplify Online Retail ETF saw a 0.4% climb, and the SPDR S&P Retail ETF registered a gain of about 0.7%. Even more noteworthy, both continued their positive momentum in after-hours trading.

This positive performance comes against the backdrop of warnings from retailers and analysts about a potentially lackluster outlook for this year’s holiday shopping season. The National Retail Federation, representing major retailers, anticipates U.S. holiday sales to reach a new record of approximately $967 billion in 2023. However, the projected 3% to 4% gain from 2022 falls below previous years, marking the smallest increase since 2019. Industry giants like Gap, Walmart, and Best Buy have expressed caution about the holiday outlook and beyond.

Michael Ashley Schulman, Chief Investment Officer at Running Point Capital, suggests that recent strikes, such as those by the United Auto Workers and Hollywood SAG-AFTRA actors, might have skewed forecasts, leading to a pullback in spending across various regions.

Despite the cautious sentiments, the SPDR S&P Retail ETF, boasting net assets of $396.6 million, recorded weekly outflows of $115.6 million in the week ending on Wednesday, according to Lipper data. However, the majority of 2023 returns for investors in U.S. retail ETFs have surged in recent weeks. The SPDR fund, up 4.98% since September 30, has seen a 5.69% increase throughout 2023. The VanEck Retail ETF has witnessed half of its 12.8% year-to-date gains in the last two months.

Michael Ashley Schulman notes that ETF investors have been unsettled by retailers issuing warnings of cautious, weak, or uneven consumer demand. However, Thomas Hayes, Chair at Great Hill Capital LLC in New York, offers a more optimistic outlook, anticipating better-than-expected gains in retail stocks this holiday season.

“Expectations are very low, which sets the stage for a positive upside surprise,” Hayes said.

In summary, U.S. retail ETFs have defied expectations on Black Friday, showcasing a more positive narrative amidst industry caution about the holiday season. The surprising uptick suggests potential resilience in the retail sector, challenging prevailing concerns and setting the stage for a potentially brighter holiday season for investors.

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