Young Americans Embrace 'Buy Now,Pay Later' For Holiday Spending: 5 ETFs To Watch

As Americans gear up for the holiday season, the latest Bank of America Winter Spending Survey has unveiled a significant shift in holiday spending trends, particularly among younger Americans.

With more than 40% of respondents expressing their intention to tighten their belts this festive season, what stands out most is the resilience of the younger generations when it comes to their holiday shopping plans. In fact, millennials and Generation Z seem least inclined to reduce their holiday expenditures.

However, to maintain a healthy spending pattern, the survey also sheds light on a significant surge in the adoption of “Buy Now, Pay Later” services within this population cohort. This shift in payment preferences suggests holiday spending might extend into the early months of the following year, potentially boosting overall holiday sales.

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Key Insights from Bank of America’s Consumer Holiday Spending Study

• Millennials and Gen Z’s Debt-Driven Approach: Nearly half of millennial and Gen Z respondents are more likely to finance their holiday spending through debt, the Bank of America Institute revealed. This debt includes credit card balances, taking out loans or borrowing from others.
• Shopping Timing Differs Between Young And Old Consumers: Millennials and Gen X consumers show a strong inclination towards promotional events like Black Friday and Cyber Monday, capitalizing on deals and discounts to stretch their holiday budgets. In contrast, Baby Boomers tend to commence their holiday spending earlier in November, adhering to a more traditional approach.
• Younger Generations Witness Declining Deposits: Despite having higher deposit balances compared to pre-COVID-19 pandemic levels, younger generations are experiencing a faster decline in their savings. This decline coincides with the resumption of student loan repayments, which is putting additional pressure on their finances.
• Gloomy Economic Outlook Looms: The survey paints a rather pessimistic economic outlook among young adults, with both Gen Z and millennials expressing concerns. Approximately half of the respondents in these age groups anticipate a downturn in the economy over the next year, suggesting a heightened sense of economic uncertainty among the younger population.

5 ETFs To Monitor Consumer Spending Performance

Here are a few ETFs that can provide valuable insights into consumer spending performance this holiday season:

1. SPDR S&P Retail ETF (NYSE:XRT): XRT is designed to provide a broad representation of the retail sector. It tracks the S&P Retail Select Industry Index, encompassing a diverse range of retail sub-industries such as apparel, automotive, and specialty stores.
2. Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY): XLY targets the consumer discretionary sector, replicating the performance of the Consumer Discretionary Select Sector Index. This ETF includes companies from industries like retail, media, and consumer services, reflecting the spending on non-essential goods and services.
3. Amplify Online Retail ETF (NYSE:IBUY): IBUY is focused on the e-commerce sector. It tracks the EQM Online Retail Index, concentrating on companies that derive a significant portion of their revenue from online and virtual sales.
4. VanEck Retail ETF (NASDAQ:RTH): RTH offers exposure to the largest retail firms in the U.S., including both traditional brick-and-mortar and online retailers.
5. Global X Millennial Consumer ETF (NYSE:MILN): MILN is designed to target the spending habits and trends of the millennial generation. It tracks the performance of the Indxx Millennials Thematic Index, investing in companies likely to benefit from the rising spending power and unique preferences of millennials, including those in technology, retail and entertainment.

Ticker	1-Month Return (%)	3-Month Return (%)	YTD Return (%)	Top 2 Holdings
XRT	12.1	13.7	18.0	The Gap Inc. (NYSE:GPS), Foot Locker Inc. (NYSE:FL)
IBUY	11.0	14.6	34.1	Affirm Holdings Inc. (NASDAQ:AFRM), Carvana Co. (NYSE:CVNA)
XLY	7.8	5.2	40.4	Amazon.com, Inc. (NASDAQ:AMZN), Tesla Inc. (NASDAQ:TSLA)
RTH	5.3	5.7	16.7	Amazon.com Inc., Home Depot Inc (NYSE:HD)
MILN	1.0	11.8	34.7	Uber Technologies Inc. (NYSE:UBER), Meta Platforms Inc. (NASDAQ:META)

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