Another Strong Holiday Shopping Season is Expected
Sources: Sources for data in tables: Equity Market and Fixed Income returns are from JP Morgan as of 11/16/18. Rates and Economic Calendar Data from Bloomberg as of 11/19/18. International developed markets measured by the MSCI EAFE Index, emerging markets measured by the MSCI EM Index. Sector performance is measured using GICS methodology.
Retailers take the spotlight this week. Third quarter earnings season is coming to a close, however, there are still a number of retailers scheduled to release earnings this week ahead of the Thanksgiving holiday break. Speaking of Thanksgiving, this leads us into Black Friday, the unofficial start of the holiday shopping season. However, before we dive into this timely topic, let’s review the economic and market activity that took place last week.
Global equity markets were largely in the red last week, with the exception of emerging markets, which advanced 1.05% according to the MSCI EM Index. In the U.S., weekly returns had been strong in November, following a very disappointing October, but suffered a setback last week. The S&P 500 Index, the Dow Jones Industrial Average, and the NASDAQ Composite were down 1.54%, 2.15%, and 2.09% respectively for the week. Small cap stocks could not avoid the retreat either, giving up 1.37% for the week, as measured by the Russell 2000 Index.
Negative news outweighed the positive news during the week. For example, we saw tech shares fall drastically early in the week when an Apple supplier cut forward guidance, WTI Crude plummet to $56 a barrel at the low, and Brexit concerns reemerge in the United Kingdom. On the bright side, we did receive news mid-week, and again on Friday, that trade discussions between the U.S. and China have resumed and some even suggested that President Trump had an optimistic tone in this regard. We contend that the uncertainty here has kept a lid on potential stock market gains; therefore, any progress reported on this front (perhaps after the G20 meeting later this month) should be good news for the stock market.
Shifting our focus back to retailers and the holiday shopping season, we have companies such as Target, Lowe’s, and Best Buy reporting on Tuesday before the start of the Black Friday annual shopping event. A confident consumer, supported by a strong jobs market and moderately rising wages, should continue to translate into strong revenues and a successful holiday shopping season in 2018. Many companies and trade publications are forecasting retail sales to grow 5%+ from a year ago. In this regard, Deloitte is forecasting that holiday retail sales could exceed $1.1 trillion this year with E-Commerce sales forecasted to increase by 22% through the holidays. Likely benefactors of a strong holiday shopping season include traditional retail companies in addition to companies that derive revenues from their respective role in the E-Commerce ecosystem. Investors certainly would be pleased to see a “Santa Claus Rally” to finish out the year of 2018.
We remain optimistic on growth prospects through the end of the year and into 2019 while recognizing that many headwinds and uncertainties persist. As a result, we encourage investors to stay disciplined and work with experienced financial professionals to help manage their portfolios through various market cycles within a well-diversified framework that is consistent with their objectives, time-frame and tolerance for risk.
Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion & Walsh cannot guarantee the accuracy of said information and cannot be held liable. This information is provided for informational purposes only and is not a solicitation to buy or sell any of the asset classes or sectors discussed.
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