Consumer Strength
The strength of the U.S. consumer will be the key focus this week. Big box retailers will be reporting earnings and hopefully, with that, we will get a good look at consumer trends heading into the holiday season. We will also get retail sales numbers for October. This could be the sixth straight month of higher retail sales, which is very important. The market cares about these reports because 68% of our economy is made up of consumer spending. We only have seven more weeks left before we are in 2021. If ever the consumer is going to be spending during the holidays, it’s fast approaching. It is especially important because we’re facing two headwinds. The lack of a second stimulus from Washington and the virus coming back in the news. In fact, over the weekend, the state of Michigan stopped all in-person school learning and closed all restaurants for three weeks. That’s a big deal because restaurants are still 14% behind in terms of sales from this point last year. That’s important because that means jobs will be on the chopping block again. When people talk about closing businesses and restaurants, you tend to think about the owners or the personnel, but there’s a huge rippling effect when it comes to food products. For instance, wine sales are down because of the restaurants being closed. The public’s buying wine, but because restaurants are not selling wine as much as they usually do. A lot of rippling effect is happening and not only affects the community, it has a rippling effect across the country.
Technical Analysis
The S&P 500 closed on Friday at 3,585. We are now looking at a resistance level of 3,660 with a support level of 3,480. With this momentum in the market and it showing more of a bullish tone, it’s really important to kind of hone in on the consumer. Thanksgiving is next week which will be followed by black Friday and Cyber Monday. It’s going to be really important to see if consumer confidence starts to build throughout the rest of the year with all of the spending opportunities coming up. We are also watching to see if companies will take this online shopping to a new standard and start to push out more online types of sales in their industries.
Adapting to Change
There are a lot of job openings across the country. As a matter of fact, it’s pretty amazing when you look at it. When you watch the news, a lot of what you see on the television just doesn’t match up to the actual data. If you go back to February, looking at all of the job postings in the United States, we’re only 2% below where we were before the virus hit. When we got into the pandemic, those job openings were about 46% less. We’ve gone from that far down all the way back to almost where we were pre-pandemic. That proves that consumers in the United States are adaptable. McKinsey and Company came out with a study looking at the consumer strength across the country. Of every four people in the sample, three people said that because of COVID, they were shopping in a new way. Not only are the jobs open, but people are adapting and that combination is very powerful here at the end of the year.
Corporation Earnings
We’re getting a lot of questions from clients about research surrounding the Coronavirus and a potential second lockdown. We’re hearing about Europe and how the coronavirus is expanding quickly there. We are also seeing a resurgent in the U.S. With that resurgence and the potential of another lockdown, why aren’t we seeing markets react as they did back in March? The reason is that companies are better prepared than they were back in March. Corporate cash for the companies in the S&P 500 are sitting on over $2 trillion. That is a lot of cash on hand that they can use to employ new people, keep people on the payroll, use it to pay a dividend, buy back stock, or pay off debt. We saw a huge issuance of debt during the Coronavirus crisis. In March and April, we saw the record issuance in corporate America. Companies are better prepared than they were back in March. In addition, with the positive news on vaccines, we can now see that the light at the end of the tunnel is likely actually the end of the tunnel and not just the train coming down the tracks at us. That uncertainty has been removed. You’re now seeing a stronger corporate America in the face of what was likely weakening consumer sentiment because of the fears of the Coronavirus outbreak. It seemed to hit Europe first and it seems to be hitting Europe again, ahead of us. Watching the trends over there will be important, but we believe that large U.S. multinational companies seem to be in a much stronger position than they were a few months back.
Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here
Bobby Norman, CFP®, AIF®
Managing Director
Wealth Consultant
Email Bobby Norman here
Ashley Page, JD, MBA
Senior Vice President
Wealth Consultant
Email Ashley Page here
Trey Booth, CFA®, AIF®
Senior Vice President
Wealth Consultant
Email Trey Booth here
Adam Vansant, AIF®
Associate Vice President
Wealth Consultant
Email Adam Vansant here
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
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