Student debt in the United States has doubled in the past two decades, surpassing credit card debt and auto loans. With upcoming debt repayments, consumer spending is expected to be curtailed, affecting retail ETFs adversely. Online retail funds and consumer discretionary sector ETFs are also expected to be affected.
According to a report by Zacks.com [16c74af3], the repayment of student debt is estimated to cut consumer spending by around $100 billion over the coming year. This reduction in spending is likely to have a significant impact on various ETFs.
The article highlights that more than 50% of respondents in a survey plan to decrease spending on clothing and accessories, followed by restaurants and footwear. This decrease in consumer spending on discretionary items is expected to negatively affect retail ETFs, including online retail funds and consumer discretionary sector ETFs.
One specific ETF mentioned in the article is MILN, which targets the Millennial generation. This ETF could be particularly affected by the repayment of student debt, as Millennials are likely to have a higher burden of student loans.
The impact of student debt on consumer spending and ETFs is already being felt, with online retail funds and consumer discretionary sector ETFs experiencing losses since the start of October. This trend may continue as debt repayments increase.
It is worth noting that while student debt may curtail consumer spending in the short term, there are other factors at play. The article mentions the rebound of e-commerce spending and the increase in credit card debt, which could offset some of the negative effects of student debt on consumer spending.
In conclusion, the rising student debt in the United States is expected to have a significant impact on consumer spending and various ETFs. Retail ETFs, online retail funds, and consumer discretionary sector ETFs are likely to be adversely affected as consumers prioritize debt repayment over discretionary purchases. However, other factors such as the rebound of e-commerce spending and increased credit card debt may mitigate some of the negative effects. Investors should closely monitor the impact of student debt on ETFs and adjust their strategies accordingly.
