Americans are expected to shell out more this Valentine’s Day thanks to solid adoption of smartphones and an upsurge in spending by millennials (25-34 age group). Per the National Retail Federation, Americans will spend an average of $143.56 – the second highest in the survey’s 15-year history. This is up from $136.57 last year but lower than the $146.84 recorded in 2016. Total spending is expected to reach $19.6 billion, up from $18.2 billion last year. Only 55% of Americans are expected to celebrate Valentine’s Day this year.
Higher spending is expected to have a positive impact on the consumer discretionary sector, which attracts a major portion of consumer spending. It will also help in driving economic growth, which is already on a solid path, with 2.3% GDP expansion last year, unemployment at the lowest level of 4.1% since December 2000 and consumer confidence around a 17-year high. The economy has added jobs for 88 consecutive months, the longest streak on record, indicating that the job market has come a long way from the Great Recession, which ended in 2009.
This coupled with the optimism over the biggest tax overhaul in decades has led to further bullishness. The new tax structure will create an economic surge and save billions in the corporate world, boosting earnings and reflation trade. Though inflation fears and the resultant speculation of faster-than-expected rates hike took a toll on the broader stock market last week, a higher interest rate is a positive for the consumer discretionary sector. This is because it means a stronger economy and a solid job market, which will create “wealth effect” resulting in higher consumer confidence.
Given this, investors seeking to capitalize the Valentine’s Day splurge should invest in consumer discretionary ETFs. Below, we have highlighted four excellent picks having a Zacks ETF Rank #2 (Buy).
First Trust Consumer Discretionary AlphaDEX Fund (FXD – Free Report)
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