Some of August's duds could be setting up for a strong end to the year.
That's according to two market analysts who told CNBC's "Trading Nation" on Friday that the retail trade should pick up steam for the rest of 2021 as back-to-school and holiday shopping return.
"Consumers are sitting on a ton of cash," between $3 trillion and $5 trillion in excess savings, Federated Hermes portfolio manager Steve Chiavarone said.
"Wages are moving up at a nice clip. And while delayed in some places, we think back to school and back to work are not at all canceled, so we think areas of consumer spending like apparel, electronics are going to be really strong in this back-to-school season," he said.
Chiavarone added that while in lockdown in 2020, consumers spent 5% more on holiday shopping than they did the prior year. Now, with more pent-up demand and Covid-19 delta variant case counts potentially peaking, this holiday season could be even bigger, he said.
The charts support that thesis, Piper Sandler's Craig Johnson said in the same interview, pointing to a graphic of the Consumer Discretionary Select Sector SPDR Fund (XLY), up less than 1% in August versus the S&P 500's more than 2.5% gain.
"The XLY has just been nicely tightening up with the longer-term uptrend support line. We're starting to see an inflection here in terms of the relative strength trend. So, it really looks like this one is a treasure that should be bought here," said Johnson, his firm's senior technical research analyst.
Not all consumer discretionary stocks are equal, however, Johnson warned, citing inventory issues at discount retailers such as Dollar Tree, Dollar General and Ollie's Bargain Outlet.
He added that though biotechnology stocks didn't underperform in August, they could also be setting up for a strong end to 2021.
Down 6% year to date, the SPDR S&P Biotech ETF (XBI) has not made a new 52-week high in six months, but its chart finally just formed a double bottom, which could signal a reversal, the analyst said.
"It looks like this is an index that could do well if we see interest rates move up [and] small and mid-cap stocks start to pick up in terms of performance," Johnson said. "A break above 140 would start a whole new leg higher for the XBI."
The XBI ended Friday's trading up nearly 3% at $132.03.