September 28, 2026

Forget Inflation: Funflation Is Here and These ETFs Are Riding on It

The U.S. economy is in the grip of “funflation,” and consumers are responding by spending more, not less, on the things they love. Evidently, Bank of America card data shows hobby spending jumped 7.9% year over year in August 2026 — more than double the 3.4% growth in transaction volume.

The beneficiaries span consumer discretionary heavyweights like Amazon AMZN to specialized entertainment and music companies riding on the hobby economy wave. As these companies outperform, exchange-traded funds (ETFs) holding them are capturing the upside.

Before identifying these funds, it is crucial to understand what “funflation” means, how it differs from the inflationary environment witnessed during the pandemic, and which stocks are affected by it.

What Is Funflation, and How Is This Cycle Different?

Funflation refers to the rising cost of leisure and entertainment — a phenomenon where consumers absorb higher prices for experiences they value.

What distinguishes this cycle from the post-COVID reopening surge is its durability and its roots in the “hobby economy.”

The 2021-2022 experience economy boom was fueled by pent-up demand after lockdowns.

Today’s funflation is more structural and has transitioned into a steady rise in digital subscriptions, at-home leisure, and localized hobbies as consumers adjust to higher prices they’ve been seeing for quite some time now.

As a result, sales at sporting goods, hobby, musical instrument, and book stores rose 10.7% in the 12 months through August, outpacing the 6% increase in total U.S. retail and food-services sales over the same period, according to the U.S. Census Bureau’s Advance Monthly Retail Trade Report.

Stocks Riding on the Hobby Economy Wave

The funflation trend is supporting a broad range of companies.

For instance, Live Nation Entertainment LYV, the world’s largest live entertainment company, sits at the intersection of concerts, festivals and premium experiences. It reported solid year-over-year sales growth of 9% in the second quarter of 2026, while its shares have gained 15% over the past six months.

Spotify Technology SPOT has been benefiting from the audio streaming boom driven by music discovery and fandom engagement. Its second-quarter 2026 sales rose 15% year over year, while the stock has rallied 7.4% over the past six months.

In travel and experiences, Expedia Group EXPE and Airbnb ABNB have also been benefiting from the wave of consumers redirecting budgets toward domestic and experience-focused getaways even as international travel costs rise. Expedia generated a 14% year-over-year revenue increase in the second quarter, while Airbnb experienced 17% top-line growth. EXPE has risen 16.6%, while ABNB has surged 27.9% over the past six months.

Traditional consumer discretionary stalwarts also booked in solid revenue growth and share price performance lately. For example, Marriott International MAR, the hotel giant, saw 4.8% revenue growth in the second quarter, while its stock moved up 10.3% over the past six months.

ETFs Riding the Funflation Wave

The recreation index, which includes video and audio, pets and pet services, sporting goods, photography, and recreational reading, rose 2.7% in the 12 months through August (as per the latest Bureau of Labor Statistics’ Consumer Price Index data).

That captures the price side of funflation: consumers are paying more for the leisure categories they value and absorbing those costs rather than cutting back. Higher prices on steady volumes mean higher revenues for the companies exposed to these categories — the same names held by the ETFs below.

Against that backdrop, the following ETFs have been rising in the recent past:

Consumer Discretionary Select Sector SPDR Fund XLY

This fund, with assets under management (AUM) worth $21.76 billion, offers exposure to 47 companies in specialty retail; broadline retail; hotels, restaurants and leisure; textiles, apparel and luxury goods; household durables; automobiles; automobile components; distributors; leisure products; and diversified consumer services. AMZN holds the first spot in this fund, with 23.11% weightage, while MAR holds the 10th position with 2.07% weightage.

XLY has gained 4.6% over the past six months and charges 8 basis points (bps) in fees.

MUSQ Global Music Industry Index ETF MUSQ

This fund, with net assets worth $20.8 million, tracks 25 companies with a core business interest in the global music industry. SPOT holds the first position in this fund, with 9.60% weightage, while LYV holds the second position with 8.75% weightage.

MUSQ has rallied 7.5% over the past six months and charges 76 bps in fees.

Invesco Leisure and Entertainment ETF PEJ

This fund, with a market value of $356.1 million, offers exposure to 31 U.S. leisure and entertainment companies that are principally engaged in the design, production or distribution of goods or services in the leisure and entertainment industries. Delta Airlines holds the first position in this fund, with 5.57% weightage, while LYV holds the fourth position with 5.02% weightage. ABNB holds the seventh position in this fund, with 4.53% weightage, while EXPE holds the eighth position with 4.28% weightage.

PEJ has soared 11.4% over the past six months and charges 58 bps in fees.

Amplify Travel Tech ETF AWAY

This fund, with net assets worth $22.7 million, includes 29 technology-focused companies within the global travel and tourism industry. Sabre Corp holds the first position in this fund, with 4.71% weightage, while EXPE holds the sixth position with 4.36% weightage. ABNB holds the eighth position with 4.25% weightage.

AWAY has risen 8.7% over the past six months and charges 75 bps in fees.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Amazon.com, Inc. (AMZN) : Free Stock Analysis Report

Marriott International, Inc. (MAR) : Free Stock Analysis Report

Expedia Group, Inc. (EXPE) : Free Stock Analysis Report

Amplify Travel Tech ETF (AWAY): ETF Research Reports

Live Nation Entertainment, Inc. (LYV) : Free Stock Analysis Report

State Street Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports