The upcoming holiday season, which includes retail sales boosting events like Thanksgiving, Black Friday, Cyber Monday and Christmas, could act as a tailwind for the broader markets. The season makes up a considerable portion of major retailers' revenues.
Retail sales in November and December will likely increase between 3.7% and 4.2% over 2024. Total spending will likely touch the range of $1.01 trillion to $1.02 trillion, per NRF. By comparison, last year’s holiday sales rose 4.3% year over year to reach $976.1 billion. Note that U.S. holiday sales are expected to top $1 trillion for the first time this year.
Sales growth may soften due to lingering economic concerns. A key headwind this year is the federal government shutdown, which hit the economy before the holiday season. Interruptions in federal spending may result in a loss of private-sector income, hurting consumer demand, per NRF. While many adverse economic impacts are expected to be passing, some impacts may be felt on the consumers’ spending patterns.
Senate Passes Government Funding Bill
Meanwhile, on the night of Nov. 10, the Senate approved a bill to fund the federal government through January, to end the longest shutdown in U.S. history. The measure passed with a 60-40 vote, supported by nearly all Republicans and a small group of Democratic senators, as quoted on CNBC.
Following the Senate’s approval, the bill will move to the House of Representatives for consideration. If the House passes it, the legislation will go to President Donald Trump for his signature to become law.
What’s Hot, What’s Not?
"American consumers may be cautious in sentiment, yet remain fundamentally strong," NRF CEO Matthew Shay said. NRF chief economist Mark Mathews said lower-income consumers are preferring essentials, as quoted on Reuters.
"More of the non-essentials that they're cutting out are in the services side of the economy, like recreation, travel, and eating out. They're not doing that, but they're continuing to spend on goods."
This puts a red flag for industry exchange-traded fund (ETFs), such as AdvisorShares Restaurant ETF EATZ and Amplify Travel Tech ETF AWAY. On the other hand, broader retail and discretionary ETFs like Consumer Discretionary Select Sector SPDR ETF XLY should outperform as consumers prefer goods over services.
Online Shopping Trend to Win?
Adobe expects U.S. online sales to hit $253.4 billion this holiday season (Nov. 1 to Dec. 31, 2025), which represents 5.3% growth year over year. A record 10 days will see consumers spend over $5 billion in a single day (up from 7 days last year).
Cyber Week (the 5-day period, including Thanksgiving, Black Friday and Cyber Monday) is expected to create 17.2% of overall pending this season, at $43.7 billion (up 6.3% YoY), per Adobe. The online shopping spree puts focus on ProShares Online Retail ETF ONLN. The ETF is likely to benefit this season.
Adobe went on to explain that Buy Now Pay Later is likely to drive an additional $2 billion in online spend this season. The trend could favor iShares FinTech Active ETF BPAY.
Further, Adobe’s prediction included consumers’ preference for using generative AI for shopping plans. Consumers are likely to depend on AI-powered chat services and browsers to find the best deals, per Adobe. This makes Roundhill Generative AI & Technology ETF CHAT a hot investing proposition.
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Amplify Travel Tech ETF (AWAY): ETF Research Reports Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports ProShares Online Retail ETF (ONLN): ETF Research Reports AdvisorShares Restaurant ETF (EATZ): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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