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Make the Most of this Holiday Season With These ETFs

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The holiday season saw a gala start with both online and in-store shopping surging on promotions, heavy discounts and free shipping. Additionally, strong economic and industry fundamentals — backed by low unemployment and rising wages, better-than-expected earnings and a bullish stock market — are laying a strong foundation for the festive period amid difficult weather trends and a shorter holiday calendar (read: 4 Solid ETF Ideas to Follow This December).

Fast Recap of Thanksgiving Weekend & Cyber Monday

Per the latest data from National Retail Federation (NRF), nearly 190 million Americans shopped during the Thanksgiving weekend (from Thanksgiving through Cyber Monday), up 14% from last year. Average spending per person over the five-day period increased 16% to $361.90. Half of the consumers shopped at department stores, and 49% bought goods online.

Black Friday was the busiest day for in-store activity, drawing 84.2 million shoppers, followed by Small Business Saturday (59.9 million), Thanksgiving Day (37.8 million), Sunday (29.2 million) and Cyber Monday (21.8 million). Department stores were the top retail destination over the five-day period with 50% shoppers’ visit. Apparel stores (36%), grocery stores (34%), electronics stores (32%) and discount stores (29%) were the next in line.

Adobe Analytic shows that online sales jumped 14.5% year over year to a record $4.2 billion on Thanksgiving. Black Friday and Small Business Saturday also witnessed record figures of $7.4 billion, up 20% and $3.6 billion, up 18%, respectively. Notably, Thanksgiving sales surpassed $4 billion for the first time ever. Cyber Monday also broke another record by raking in $9.4 billion in online sales. The NRF said that Black Friday topped Cyber Monday as the busiest day online with 93.2 million shoppers compared with 83.3 million for the latter for the first time (read: Cyber Monday vs Black Friday: ETFs & Stocks in Focus).

Steady U.S. Growth

Though consumer confidence and factory activity dipped for the fourth consecutive month in November amid fears of trade war, consumer spending, which accounts for more than two-thirds of U.S. economic activity, is rising modestly. It steadily rose in October, suggesting the moderate pace of growth in the economy. Also, the unemployment rate is hovering around the lowest level since 1969 and the third-quarter GDP growth was revised upward recently from 1.9% to 2.1%.

Additionally, the housing market is clearly showing signs of a strong recovery as lower mortgage rates and slower home price growth are acting as catalysts (read: Upbeat Data to Renew Confidence in Homebuilding ETFs).

Further, NRF expects holiday sales to grow 3.8-4.2% for November and December to $727.9-$730.7 billion. This is higher than last year’s growth of 2.1% and the five-year average of 3.7%. Of these, online and other non-store sales are likely to increase 11-14% to $162.6-$166.9 billion, up from $146.5 billion last year. eMarketer forecasts U.S. holiday retail sales to cross trillion-dollar for the first time, up 3.8% year over year.

Per Deloitte’s annual holiday retail projections, total retail sales would climb 4.5-5.0% for the period (November through January), up from 3.1% in 2018. Online sales are expected to grow 14-18% year over year to $144-$149 billion.

What’s Hot?

Given the holiday optimism and digital shopping boom, stocks in the Internet and retail space look poised for solid gains this month. Investors could tap this opportunity in a diversified way with the help of the following ETFs and make the most of the annual shopping event:

SPDR S&P Retail ETF (XRT - Free Report)

This product tracks the S&P Retail Select Industry Index, holding 85 securities in its basket, with none accounting for more than 1.9%. The fund has amassed $244.1 million in its asset base and charges 35 bps in annual fees. Volume is extremely solid, exchanging nearly 5 million shares in hand a day, on average. The fund has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

Amplify Online Retail ETF (IBUY - Free Report)

This ETF has attracted $241.3 million in its asset base. It offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund is home to 47 stocks and charges 65 bps in fees per year.

VanEck Vectors Retail ETF (RTH - Free Report)

This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. It has amassed $102.9 million in its asset base and charges 35 bps in annual fees. RTH trades in a lower volume of 11,000 shares and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Not Santa, Trade Will Rule This December: ETFs to Your Rescue).

ProShares Online Retail ETF (ONLN - Free Report)

This ETF focuses on global retailers that derive significant revenues from online sales. It tracks the ProShares Online Retail Index, holding 24 stocks in its basket. The product has amassed $21.9 million in its asset base. It currently trades in a paltry volume of around 11,000 shares a day on average. It charges 58 bps in annual fees from investors.

First Trust Dow Jones Internet Index Fund (FDN - Free Report)

This fund follows the Dow Jones Internet Composite Index, giving investors exposure to the broad Internet industry. It holds about 42 stocks in its basket. FDN is the most popular and liquid ETFs in the broad technology space with AUM of $7.7 billion and average daily volume of around 385,000 shares. It charges 52 bps in fees per year and has a Zacks ETF Rank #3 with a High risk outlook.

Invesco NASDAQ Internet ETF (PNQI - Free Report)

This fund offers exposure to the largest and most-liquid companies that are engaged in Internet-related businesses by tracking the Nasdaq Internet Index. Holding 83 stocks in its basket, it has AUM of $527 million and trades in a lower volume of about 15,000 shares a day. It charges 62 bps in fees per year and has a Zacks ETF Rank #2 with a High risk outlook (read: Top-Ranked ETFs to Buy on the Dip This December).

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