There's No Chill in Retail ETFs

Includes: PSCC, PSCD, RCD
by: Tom Lydon

Retail spending was on a tear this December until the East Coast got smacked by a blizzard. Will the snow stop consumer exchange traded funds in their tracks?

This holiday season, the shoppers came back out in force. Total consumer spending, excluding autos, rose 5.5% to $584.3 billion from Nov. 5 through Dec. 24, compared with the same 50-day period a year ago, according to SpendingPulse, reports Anne Dinnocenzio for the Associated Press.

But two things could be a cold slap in the face:

  • The Conference Board’s Consumer Confidence Index reported confidence fell in December. According to Mitchell Hartman for MarketPlace, the report was a surprise. One explanation is that the report was done around the time November job numbers were released. A rising unemployment rate certainly can ding anyone’s confidence.
  • A snowstorm of epic proportions. The blizzard is estimated to have the potential to delay $100 billion in retail spending, but the good news: it won’t derail the best holiday shopping season since 2007, says the Associated Press.

Michelle Heng for ZippyCart reports that shoppers back on the East coast may be snowed in, but not even that can stifle the holiday spending. Shoppers can stay in and shop-online that is.

Although there’s snow, you can’t forget that millions are bored, stuck inside their homes and ready to put to use the gift cards they received over the holidays. Even if they couldn’t get out of the house, we’re willing to bet that many are still continuing to shop and take advantage of the extended holiday deals that retailers are offering up – including good old free shipping.

In the last month, retail ETFs have kept in line with the broader market – even slightly outpacing it in some cases. Leading the charge are PowerShares S&P SmallCap Consumer Staples (XLPS), up 6% in the last month; PowerShares S&P SmallCap Consumer Discretionary (XLYS), up 4.6%; and Rydex S&P Equal Weight Consumer Discretionary (NYSEARCA:RCD), up 3.7%.

The leading retail ETFs also show two other continuing trends: the small-cap rally is firmly in place, and consumer staples are still the order of the day for many shoppers.

Tisha Guerrero contributed to this article.