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Vaccines & Stimi Checks: Betting on the Retail Stock Boom

May 04, 2021

Editor’s note: Any and all references to timeframes longer than one trading day are for purposes of market context only, and not recommendations of any holding timeframe. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don’t have the resources, time or inclination to constantly monitor and manage your positions, leveraged ETFs are not for you.

People like buying stuff. They also like getting to experience new and exciting things. Both of these parts of modern life have been largely put on hold in the past year due to COVID-19, and people seem ready to spend again.

With COVID vaccine rates continually rising in the United States (more than 32%* of the population fully vaccinated so far) the physical economic landscape is showing some vigor, and many people are finally getting out and about again. As more lockdowns and restrictions seem less likely, many consumers are regaining confidence in traditional shopping, with a recent University of Michigan Surveys of Consumers study showing continued improved consumer perceptions on consumer sentiment and current economic conditions in April.

Online retailers have done very well during the past year with the industry growing 44% in 2020**, and could rake in even more money as spending becomes more widespread. Much of the United States retail and discretionary spending sectors not only appear to be gearing up for a return to some semblance of normalcy, but are also expecting a surge in spending from pent-up demand.

Buy! Buy! Buy!

With all the money saved up from a lot of rainy days, and stimulus checks sent out to many, spending power has come around, but without as many things and experiences to spend it on.

Investors who have a bullish outlook on upcoming consumer spending activity in the discretionary economy may want to look into tools and vehicles to leverage the current trends to their advantage.

Sell in May? Or Bet on the Consumer?

One tool for betting on the consumer, including internet and specialty retail, on a short-term basis is the Direxion Daily Consumer Discretionary Bull 3X Shares (WANT). It provides 3X leverage on a daily basis of the Consumer Discretionary Select Sector Index, an S&P Dow Jones Indices index of consumer discretionary companies based in the United States.

Cumulative Returns. Source: Bloomberg. Data represents past performance and 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 and month-end click here.

For traders looking for a short-term exposure to a bullish hypothesis on discretionary consumer spending, WANT provides a vehicle for leveraged speculation on an extremely important industry including companies like Amazon, Tesla, McDonald’s, and Starbucks.

For those who want exposure to a broader index focused on retail stocks, there’s the Direxion Daily Retail Bull 3X Shares ETF (RETL) which seeks a return that is 300% the return of the S&P Retail Select Industry Index (SPSIRETR) for a single day.

Cumulative Returns.Source: Bloomberg. Data represents past performance and 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 and month-end click here.

While the economies of the United States and many other countries continue to look to be on the path to recovery, it may be only a matter of time until people around the world begin to spend more and end up contributing to a global resurgence in the discretionary economy.

*Centers for Disease Control and Prevention (5/3/2021)

**Digital Commerce 360 (2/15/2021)

WANT Top 10 Index Holdings%
Amazon.com22.86
Tesla13.83
Home Depot8.86
Mcdonald's4.54
Nike - Class B4.22
Lowe's3.77
Starbucks3.49
Target2.69
Booking Holdings2.59
TJX2.16

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, or daily inverse leveraged, investment results and intend to actively monitor and manage their investment.

Short-term performance, in particular, is not a good indication of the fund’s future performance, and an investment should not be made based solely on returns. Because of ongoing market volatility, fund performance may be subject to substantial short-term changes. For additional information, see the fund’s prospectus.

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at www.direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.

CUSIP Identifiers have been provided by CUSIP Global Services, managed on behalf of the American Bankers Association by Standard and Poor’s Financial Services, LLC, and are not for use or dissemination in any manner that would serve as a substitute for a CUSIP service. The CUSIP Database, ©2011 American Bankers Association. “CUSIP” is a registered trademark of the American Bankers Association.

Shares of the Direxion Shares are bought and sold at market price (not NAV) and are not individually redeemed from a Fund. Market Price returns are based upon the midpoint of the bid/ask spread at 4:00 pm EST (when NAV is normally calculated) and do not represent the returns you would receive if you traded shares at other times. Brokerage commissions will reduce returns. Fund returns assume that dividends and capital gains distributions have been reinvested in the Fund at NAV. Some performance results reflect expense reimbursements or recoupments and fee waivers in effect during certain periods shown. Absent these reimbursements or recoupments and fee waivers, results would have been less favorable.

Direxion Shares Risks - An investment in the ETFs involves risk, including the possible loss of principal. The ETFs are non-diversified and include risks associated with concentration that results from an ETF’s investments in a particular industry or sector which can increase 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 ETFs do not attempt to, and should not be expected to, provide returns which are a multiple of the return of their respective index for periods other than a single day. For other risks including leverage, correlation, daily compounding, market volatility and risks specific to an industry or sector, please read the prospectus.

Distributor for Direxion Shares: Foreside Fund Services, LLC.

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