US retail ETFs show strong performance on black friday

On Black Friday, exchange-traded funds (ETFs) monitoring US retailers demonstrated notable gains during shortened trading hours, surpassing broader market indexes.

While the S&P 500 index remained relatively unchanged, the Amplify Online Retail ETF rose by 0.4 per cent, and the broader SPDR S&P Retail ETF saw a gain of approximately 0.7 per cent. Both ETFs continued their upward trend in after-hours trading.

Despite concerns raised by retailers and analysts about a potentially lacklustre outlook for this year's holiday shopping season, ETFs tracking the retail sector showcased resilience.

The National Retail Federation, representing major retailers, anticipates the overall US holiday spending to reach a new record of about $967 billion in 2023. However, this forecast, reflecting a 3 per cent to 4 per cent gain from 2022, is the smallest increase since 2019.

Cautionary sentiments have been expressed by retailers like Gap, Walmart, and Best Buy, with some attributing the subdued outlook to recent events such as the United Auto Workers and Hollywood SAG-AFTRA actor strikes.

Michael Ashley Schulman, Chief Investment Officer at Running Point Capital, commented, "I believe that some forecasts have been distorted by the recently ended strikes, causing a pullback in spending among various large pockets across the country."

The SPDR S&P Retail ETF, with net assets of $396.6 million, recorded weekly outflows of $115.6 million in the week ending Wednesday, the largest drop in a month, according to Lipper data.

Despite this, the majority of 2023 returns for investors in US retail ETFs have materialised in recent weeks. The SPDR fund has gained 4.98 per cent since Sept. 30 and 5.69 per cent throughout 2023. The VanEck Retail ETF has seen half of its 12.8 per cent year-to-date gains in the last two months.

Michael Ashley Schulman added, "ETF investors have been alarmed by retailers warning of cautionary, weak, or uneven consumer demand."

Thomas Hayes, Chair at Great Hill Capital LLC in New York, holds a more optimistic view, anticipating better-than-expected gains in retail stocks this holiday season. "Expectations are very low, which sets the stage for a positive upside surprise," he said.

(With Reuters inputs)