ETFs to Tap July 4 Spending and Travel Trends

Fourth of July consumer spending is projected to reach $8.9 billion, a decrease from the previous year's $9.4 billion, attributed to rising costs from inflation and tariffs, despite a slight increase in average per-person spending to $92.44. Conversely, holiday travel is anticipated to be the busiest ever, with 72.2 million Americans traveling, primarily by road due to lower gas prices, although airfares are up 4%. This mixed consumer behavior is expected to boost revenues across travel, leisure, hospitality, restaurant, and retail sectors, with specific ETFs identified for investors seeking exposure.

Analysis

The upcoming Fourth of July holiday presents a bifurcated outlook for consumer-facing sectors. Aggregate consumer spending is projected to decline to $8.9 billion from $9.4 billion the prior year, reflecting pressure from inflation and tariffs, even as average per-person spending inches up to $92.44 from $90.42. This suggests consumers are being more selective, a trend that creates a mixed environment for general retailers, as reflected in the VanEck Retail ETF's (RTH) neutral 'Hold' rating. In stark contrast, the travel sector is poised for a record-breaking holiday week, with AAA forecasting 72.2 million travelers. This surge is predominantly driven by road travel, with a record 61.6 million people expected to drive, encouraged by the lowest gasoline prices since 2021 at an average of $3.15 per gallon. While air travel is also robust, it faces the headwind of a 4% year-over-year increase in average domestic fares to $810. This clear strength in travel underpins the 'Strong Buy' rating for the highly liquid U.S. Global Jets ETF (JETS), which boasts $819 million in AUM, while related but less liquid funds in hotels (BEDZ) and restaurants (EATZ) also stand to benefit.

Key Decisions for Investors

• Given the record travel forecasts driven by low gas prices, investors should consider overweighting exposure to the airline and travel technology sectors, as reflected in the positive outlook for ETFs like JETS and AWAY.
• A cautious or neutral stance on broad retail is warranted due to the projected 5.3% decline in total holiday spending, which signals consumer selectivity despite planned retail discounts; the 'Hold' rating on RTH supports this view.
• Pay close attention to an ETF's liquidity and risk profile, as the options presented range from the highly liquid U.S. Global Jets ETF (JETS) with $819M in AUM to niche, illiquid funds like the AdvisorShares Hotel ETF (BEDZ) with only $2.7M in assets.
• Monitor the divergence between robust travel spending and constrained general goods spending, as this indicates a clear prioritization by consumers that could define sector performance through the second half of the year.