Murky Forecast for Holiday Shopping - TheStreet

Murky Forecast for Holiday Shopping

The holiday shopping season officially starts later this week, but opinion is divided on whether consumers will turn out in force.
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By Kevin Grewal, Editorial Director at



) -- Thanksgiving is right around the corner, and so is Black Friday, which is the official start of the holiday shopping season and traditionally the nation's single busiest shopping day.

Consumer spending has been sluggish during the Great Recession, and it's unclear whether it will pick up enough during the coming holiday season to give the retail sector the boost it needs.

Most retail industry experts expect lots of people to go shopping on Black Friday, because many retailers are expected to offer exceptional discounts and tailor their offerings to penny-pinching consumers.

For example,


(WMT) - Get Report

is offering consumers a $100 gift card with the purchase of a $199 Nintendo Wii, while

Best Buy

(BBY) - Get Report


Office Depot


are advertising netbook computers with the new Windows 7 software, for under $300 and


(TGT) - Get Report

is expected to offer some home appliances for as little as $3.

Some experts say consumer demand may be surprisingly strong in the next month, because consumers have had more than a year to adjust their spending habits, cope with the weak economy and put a holiday shopping plan together.

Another positive is that retailers have made it easier for consumers to purchase big-ticket items by offering extended layaway plans and earlier sales.

A combination of these factors, has led the International Council of Shopping Centers to forecast a 1%-2% rise in holiday sales.

Those who are looking at the glass as half empty say rising unemployment and an unstable economic outlook will cause consumers to remain cautious and refrain from impulse buying. Additionally, they are suggesting that special sales that retailers had earlier this year may have an adverse affect on Black Friday revenues because some consumers have already made their big purchases for the year. This has led organizations like the National Retail Federation to suggest that revenues for the holiday season are likely to decline.

Investors also need to keep in mind that even if consumers turn out in force and boost retailer revenues, this year's eye-popping discounts may erode margins.

Some equities that will be influenced by Black Friday are:

  • SPDR S&P Select Retail ETF (XRT) - Get Report, up 93% from a March low of $18.27 to close at $35.17 on Monday
  • Merrill Lynch Retail HOLDRs (RTH) - Get Report, closing at $94.59 on Monday after seeing a March low of $61.26, an increase of 54%.
  • SPDR S&P Select Consumer Discretionary (XLY) - Get Report, up 80% from a March low of $16.11 to close at $28.94 on Monday.

When investing in equities, it is important to keep in mind the inherent risks involved. To help mitigate these risks, an exit strategy is important. According to the latest data at

, an upward trend in the aforementioned ETFs could come to an end at the following price points: XRT at $33.71; RTH at $90.83; and XLY at $27.61. These price points change on a daily basis as markets fluctuate and updated data can be found at

-- Written By Kevin Grewal in Laguna Niguel, Calif.

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At the time of publication, Grewal had no positions in equities mentioned.

Kevin Grewal serves as the editorial director and research analyst at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Additionally, he serves as the editorial director at where he focuses on mitigating risks and implementing exit strategies to preserve equity. Prior to this, Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.