shopping

5 ETFs to Ride the Upcoming Holiday Season Shopping Wave

The coronavirus outbreak continues to be a major concern across the earth with the situation aggravating in the United States, Europe and in India. Unfortunately, the health crisis already claimed more than a million lives globally.

Moving on, even as the U.S. economy is reopening in phases and social-distancing restrictions are being eased, people are trying to minimize human-to-human contact. It’s largely because the pandemic resulted in some changes in the lifestyle and preferences of Americans.

Meanwhile, the holiday season is around the corner, which generally marks the late October-December period. This time of the year is one of the most important phases for a large number of companies from the business point of view. The quarter also witnesses some popular retail events like Halloween, Thanksgiving, Cyber Monday, Black Friday and Christmas, which increase its significance to the retailers.

According to Deloitte’s report on holiday spending forecasts, retail sales may see growth of 1-1.5% during the November-January period, per a CNBC article. It comes to $1.147-$1.152 trillion, based on the 2019 sales level of $1.14 trillion. 

Per the firm’s projections, decreasing unemployment, additional government stimulus and an effective coronavirus vaccine could boost spending by more affluent consumers while continued concerns about personal health and finances could turn lower-income groups even more conservative.

Keeping up with the digitization trend, the upcoming U.S. holiday season is expected to see a significant surge in online sales. Going by the latest forecast from software provider Salesforce.com, a 34% year-over-year (nearly tripling last year’s growth) jump is expected in online holiday sales in the United States (per a Digital Commerce 360 article).

Moreover, Rob Garf, VP of Industry Insights for Retail and Consumer Goods, Salesforce reportedly said that “businesses that succeed during the holidays will use everything at their disposal to make shopping easy and safe, including convenient digital ordering, creative and efficient fulfillment, and responsive customer service.”

Against this backdrop, let’s look at some ETFs that are well-poised to gain from a busy shopping season this year:

Amplify Online Retail ETF IBUY

Strikingly, even as the rebooting of the U.S. economy happens in phases and social-distancing restrictions get relaxed, people are increasingly opting for contactless operations. In fact, U.S. online sales rose 42% year over year in August, according to the latest Adobe Analytics data. Since March, Adobe attributes the pandemic to an extra $107 billion spent online. Also, per Salesforce, digital revenues are expected at $221 billion whereas total holiday sales are estimated to hit $730 billion in the November-December period as reported in a Digital Commerce 360 article.

The fund seeks to provide investment results that, before fees and expenses, correspond generally to the price performance of the EQM Online Retail Index. With AUM of $891.5 million, the fund has an expense ratio of 65 basis points (bps) (read: ETF Areas That Remained Strong in the First 9 Months of 2020).

iShares Transportation Average ETF IYT

This holiday season appears to be a relatively strong period for retailers. Additionally, the growing ecommerce popularity has resulted in an expanded reach for the players in the retail space. That’s why there should be increased demand for freight services to deliver the products ordered online.   

IYT provides exposure to U.S. airline, railroad and trucking companies, and tracks the Dow Jones Transportation Average Index. With AUM of $1.13 billion, the fund has an expense ratio of 42 bps (read: 4 Best S&P 500 Sectors of Q3 and Their Top ETFs).

The Consumer Discretionary Select Sector SPDR Fund XLY

Ten of 11 S&P sectors were positive with the consumer discretionary sector leading with a rise of 14.9% in the third quarter. The reopening of U.S. states came as a ray of hope for players in the consumer discretionary sector and gained investors’ attention. A number of restaurants and retailers started resuming business as restrictions got gradually relaxed in the United States. Notably, stocks within the cyclical sectors mostly behave in tandem with the prevalent economic conditions and when growth returns to normal levels, these sectors automatically perform well.

This is the largest and the most popular product in the consumer discretionary space with AUM of $15.56 billion. It tracks the Consumer Discretionary Select Sector Index. The fund charges 13 bps in fees per year (read: Trump vs. Biden First Presidential Debate: ETFs in Focus).

ETFMG Prime Mobile Payments ETF IPAY

In line with the surging online shopping trend, customers are resorting to digital payments to clear their bills while merchants and utility providers are increasingly advocating the same. Per Statista, total transaction value in the Digital Payments segment should see a 15.3% year-over-year growth rate in 2020 on a 5.4% rise in users.

The underlying Prime Mobile Payments Index provides a benchmark for investors interested in tracking the mobile and electronic payments industry, specifically focusing on credit card networks, payment infrastructure and software services, payment processing services and payment solutions. With an AUM of $799.5 million, the fund charges 75 bps in fees (read: Bet on These ETFs to Gain From Coronavirus-Shaped “New Normal”).

VanEck Vectors Retail ETF RTH

The current wave of digitization is favoring both e-commerce pure plays and traditional retailers, which are foraying into e-commerce to tap the buoyancy in online shopping. Meanwhile, retailers like Walmart Inc. (WMT) and Kroger’s (KR) are moving toward a hybrid/omnichannel model so that customers can enjoy quick deliveries or collect items ordered online (BOPIS, curbside pickup) at their convenience and through apps that arrange personal shoppers. The trend is a boon for a number of retail players, motivating them to ramp up omni-channel offerings.

The fund seeks to replicate as closely as possible, before fees and expenses, the price and the yield performance of the MVIS US Listed Retail 25 Index. With an AUM of $179.4 million, the fund charges 35 bps in fees (read: 5 ETFs to Play in October).

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VanEck Vectors Retail ETF (RTH): ETF Research Reports

iShares Transportation Average ETF (IYT): ETF Research Reports

Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports

Amplify Online Retail ETF (IBUY): ETF Research Reports

ETFMG Prime Mobile Payments ETF (IPAY): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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