Has the retail sector hit a bottom?

is XRT ETF a good play rn?

We know retailers have had a rough year. But has the pummeling stopped for now?

The retail ETF with symbol XRT is a pretty good proxy for the sector, although it would be possible to buy a basket of the mega-cap retailers and probably get pretty similar exposure. So how has XRT performed in the last few months? After dipping down to just under $60, it charged up to over $70 before retrenching recently to about $65. So does the $60 number represent the bottom, or will that level be re-tested again soon?

¹

Of course it’s impossible to say for sure but the recent news about inflation (very high in Germany right now) has worried the market again in the last week. This has hit the retailers in line with the overall market. So what if they have worked to manage expectations and reduce inventories?

So that’s probably what we are looking at. No exceptional new issues with retailers: labor issues, inflation, and more is already priced-in for this sector.

²

But that won’t stop these shares from falling if the overall market continues to show weakness. So it probably makes sense to hold retailers at a market weighting but not much more so for now.

Disclosure: Through personal holdings that I control and through investment LLCs in which I am a partner, I buy, hold, and sell stocks, bonds, ETFs, options, and cryptocurrencies, not limited to but including some of those discussed in this newsletter.

1. The 1 year chart shows how hard the sector has been hit compared to an overall market ETF that excludes the oil sector (SPYX)

2. The labor issues are probably going to take longer to work out than the supply chain ones