The Xchange Blog

Retail Sector Moves Transportation Higher

If the past couple earnings seasons have revealed anything, it’s that the reports of the death of the retail sector that circulated through much of 2017 were greatly exaggerated.  

Traditional retailers like Macy’s, Walmart, DSW, and Target, to name a few, have all shown strong sales growth this year. Target CEO Brian Cornell even called this retail environment the best he’s ever seen.

On a short-term basis, you can see how traders are taking advantage of this trend. The Direxion Daily Retail Bull 3X Shares ETF (RETL), which tracks the holdings of the S&P Retail Select Industry Index, has seen approximately $14 million in inflows since the start of the third quarter, and the fund is up about 23 percent in that time.

RETL Performance
Retail Stocks ETFs
Data Range: 7/1/2018 – 8/29/2018. Source: Bloomberg. The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost; current performance may be lower or higher than the performance quoted. For standardized performance and the most recent month-end performance, click here.

However, the argument for a retail resurgence is all hindsight. The real story behind those encouraging sales numbers isn’t the point of sale, but the promise of consumer demand. The National Retail Federation’s retail sales report for July confirmed as much, with 2018 sales on pace to increase 4.5 percent over 2017. Further proof of this consumer confidence featured as key talking points in both Walmart and Macy’s earnings results, though Macy’s might have liked to seen a stronger bump.

By Econ 101 logic, that demand requires a steady flow of supply. If consumer spending habits are on the uptick, as most indicators seem to suggest, then the transportation sector should be humming along as well.

Evidence of Transport’s strength is already beginning to shine through in the Direxion Daily Transportation Bull 3X Shares ETF (TPOR), which has rallied 27 percent since the beginning of July.

TPOR Performance
Transportation Stocks ETFs
Data Range: 7/1/2018 – 8/30/2018. Source: Bloomberg. The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost; current performance may be lower or higher than the performance quoted. For standardized performance and the most recent month-end performance, click here.

 

Related Leveraged ETFs

 


Each leveraged ETF seeks investment results that are 300% of the return of its benchmark index for a single day. Each Fund should not be expected to provide returns which are three times the return of benchmark’s cumulative return for periods greater than a day. Investing in a Direxion Shares ETF may be more volatile than investing in broadly diversified funds. The use of leverage by a Fund increases the risk to the Fund. The Direxion Shares ETFs are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk, consequences of seeking daily leveraged investment results and intend to actively monitor and manage their investment.
 
RETL Risks – An investment in the Fund involves risk, including the possible loss of principal. The Fund is non-diversified and includes risks associated with the Fund concentrating its investments in a particular industry, sector, or geographic region which can result in increased volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause their price to fluctuate over time. The Fund does not attempt to, and should not be expected to, provide returns which are three times the return of its underlying index for periods other than a single day. Risks of the Fund include Effects of Compounding and Market Volatility Risk, Leverage Risk, Counterparty Risk, Daily Index Correlation/Tracking Risk, Intra-Day Investment Risk, Other Investment Companies (including ETFs) Risk and risks specific to investment in the securities of the Retail Industry. Please see the summary and full prospectuses for a more complete description of these and other risks of the Fund.
 
TPOR Risks – An investment in the Fund involves risk, including the possible loss of principal. The Fund is non-diversified and includes risks associated with the Fund concentrating its investments in a particular industry, sector, or geographic region which can result in increased volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause their price to fluctuate over time. The Fund does not attempt to, and should not be expected to, provide returns which are three times the performance of its underlying index for periods other than a single day. Risks of the Fund include Effects of Compounding and Market Volatility Risk, Leverage Risk, Counterparty Risk, Intra-Day Investment Risk, Daily Index Correlation Risk, Other Investment Companies (including ETFs) Risk and risks specific to investment in the securities of the Transportation Industry and the Industrials Sector. Please see the summary and full prospectuses for a more complete description of these and other risks of the Fund.
 
Dow Jones Transportation Average (DJTTR) – Provided by Dow Jones U.S. Index and measures the performance of large, well-known companies within the transportation industry (e.g. shipping, railroad companies, airlines, etc.). One cannot directly invest in an index.
 
S&P Retail Select Industry Index (SPSIRETR) – A modified equal-weighted index that is designed to measure performance of the stocks comprising the S&P Total Market Index that are classified in the Global Industry Classification Standard (GICS) retail sub-industry. One cannot directly invest in an index.