MThe markets are heaving a collective sigh of relief as the earnings of the big box office chains are overwhelmingly positive. Home Depot and Walmart, two of the largest retailers in the United States, both reported strong profits and raised expectations for the holiday season and fourth quarter, according to Financial Time.
Walmart raised the financial outlook for the third consecutive quarter after reporting better-than-expected sales and higher inventory levels to break through supply chain bottlenecks. Home Depot profits were also higher than expected and continued to grow in the first two weeks of this month, according to Richard McPhail, chief financial officer, of the earnings call for the leading home improvement retailer.
Census Bureau figures released this morning reflect continued consumer spending even amid rising prices, with sales increasing 1.7% from September. Retailers have struggled to tackle holiday shortages in advance by stocking up; The Home Depot reports that it already has nearly all of its fourth-quarter products and doesn’t care about supply chain grunts.
With strong indicators of future growth and momentum from two of America’s largest retail chains, investors are looking more positively at retail sales during the holiday season. Growing inflationary pressure is pushing prices up in many sectors, and fears that retail data may have been stable for October are ruled out, at least for now.
RSP also invests to capture growth while hedging naturally
For investors looking to take advantage of the growth and positive developments of major players such as Walmart and Home Depot while potentially guarding against the underperformance of factors such as inflation, Invesco S&P 500 Equal Weight ETF (RSP) may be a good solution.
RSP seeks to invest at least 90% of its assets in securities of the S&P 500 Equal Weight Index, an index composed of all securities of the S&P 500 but equally balanced in their weightings. This allows investors to gain exposure to the overall performance of the S&P 500, but since no stock is weighted more due to its market capitalization, it naturally hedges against underperformance and volatility.
By balancing the weighting across all market caps with a heavier concentrated-only sector weighting due to the makeup of the S&P 500 itself, the fund can capture growth in outperforming sectors, such as retail, while offsetting any underperformance of other sectors. Large-scale investing can be a natural hedge against volatility, and the RSP takes advantage of it.
The current major sector allocations include Information Technology at 15.09%, Industries at 14.60%, Financials at 13.34%, Consumer Discretionary at 12.74% and Healthcare at 11, 86%.
RSP has an expense ratio of 0.20% and currently has 508 holdings.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.