March was good. Very good. Consumers shopped more than they have in several years. Sure, they’re not flinging Benjamins with abandon, but the signs of a turnaround are there. Retail ETFs come in several varieties for you to play along at home.
SPDR S&P Retail (XRT) is trending higher, up 16% though this March. Now the numbers are coming in, and they’re backing up that performance: same-store sales in March rose 9.1% from a month earlier, the biggest jump since records started being kept in 2000.
Factors such as continued job creation, and a lower rate of unemployment are going to help retailers to continue their advance. However, while the overall mood of consumers has gone from panicked to cautious, a resumption of our normal spending habits is going to take time.
Stephanie Rosenbloom for The New York Times reports that rising factory output and a boost in retail sales are bolstering consumers to buy jewelry, cars, clothes and the like. Sales gains in March, in fact, were seen across all categories: spending on luxury goods rose 22.7%; home furnishings, 13.8%; specialty apparel, 5.2%.
Retail ETFs fall into a few categories:
Funds that hold a broad mix of retailers of all types – anything from online travel sites to McDonald’s (MCD) may be included. Watch out with the HOLDRs: they tend to have very heavy weightings in a few companies and can only be bought in 100-share increments.
Consumer discretionary, a category of spending defined as “non-necessity” items. Televisions, automobiles, DVD players and the like.
- Vanguard Consumer Discretionary ETF (VCR)
- First Trust Consumer Discretionary AlphaDEX (FXD)
- PowerShares Dynamic Leisure & Entertainment (PEJ)
- PowerShares Dynamic Consumer Discretionary (PEZ)
- Rydex S&P Equal Weight Consumer Discretionary (RCD)
Consumer staples, which are the “necessary” items that few of us can live without. This includes toothpaste, household cleaners, toilet paper and basic food items.
- PowerShares Dynamic Consumer Staples (PSL)
- Vanguard Consumer Staples ETF (VDC)
- Rydex S&P Equal Weight Consumer Staples (RHS)
- Consumer Staples Select Sector SPDR (XLP)
And finally, there’s luxury spending. The kind of spending that spares no expense. Coach bags (COH), Nordstrom clothing (JWN) and stays at Wynn Resorts (WYNN). You can access these retailers in the Claymore/Robb Report Global Luxury (ROBB).
Read the disclaimer: Tom Lydon is a board member of Rydex|SGI.