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How spread betters can profit despite retail gloom
Things have taken a turn for the worse on the high street. But for spread betters, market gloom holds as much profit potential as market joy, says Tim Bennett.
Things have taken a turn for the worse on the high street. According to the BRC retail sales were down in February - like for like (stripping out new space) they were down 0.4% while total sales rose 1.1%. The end result is the worst monthly performance since 2009.
Dig down however and the figures make truly grim reading for specific parts of the sector. Given that footwear and food and drink retailers saw limited growth "clothing, furniture and electrical retailers saw sharply negative sales" according to consultancy KPMG.
And it's not hard to work out why. The combination of a VAT increase, uncertainty about the scale of the austerity cuts coming in April, plus worries about rising inflation - and thus interest rates - is keeping consumers on the back foot. So much so that consultants at BDO have written off February as an "ugly" month.
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However, for spread betters, market gloom holds as much profit potential as joy. And that's not being cynical it's being practical. There's nothing any investor can do about the retail climate, but you can make some money from the sector until it shows solid signs of recovery.
Spread betting allows you to go short on either individual retailers or the sector as a whole. You can even pairs trade say the retail sector against the wider market say the FTSE 100 index (for example by placing a downbet on retail and an upbet on the FTSE 100 as a bet that retailers will continue to lag).
Don't forget to consider stop losses to limit the damage should you short a share that then rises sharply. And if you are new to spread betting, do some more research before diving in.
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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.
He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.
