This week Thanksgiving is celebrated across America with family and friends. At times it is hard to find something to celebrate; at other times there seems to be an abundance of thanks-worthy things.. The holiday, founded by colonists, was started to celebrate the freedoms and new world opportunities of America.
America has much to be thankful for this year. With unemployment at a five-decade year low, more Americans are in a better place than in previous years. This has been reflected in consumer discretionary spending data. Consumer spending is broken into two categories. One category is “must haves,” such as toothpaste, utilities or other basic-need items. The other category is purchases that are not necessities, non-essentials such as entertainment, luxury brands or items on which you might splurge. This year discretionary spending has been up, propping up the economy.
This has been one very bright spot in the market. It’s one of the many indices on which economists have cited as the reasons why the market has rallied higher and it is a reason why the U.S. economy would avoid a recession. Retailers are showing mixed results as Home Depot and Kohls missed their target and fell by double digits. Target and WalMart reported positive beats and surged. News came out that Louis Vuitton would purchase Tiffany’s. This is a mixed report, it seems. Heading into “Black Friday,” many analysts will be watching consumers spending. One of the new ways to track this is by satellite…yes, by satellite. Satellite imagery to be precise. Images are taken of retailers parking lots: comparisons are made as to how full or empty they are over the periods of analysis.
Corporate American has not been spending though. This is tracked with inventories, labor metrics and other data points. For three quarters, corporate earnings have been revised downward for the following quarter. Most of these benchmarks have been beaten and this does sound good. However, sometimes the bar is lowered, in order to beat it and beat it easily. To me this isn’t a strong position for corporate America.
Another measure is Gross Domestic Product (GDP). This is a broad measurement of all goods and services created during a set period of time by a particular country. The third quarter reported 1.8% above downward revisions of 1.6%. This week it was revised upward to 2.1%. This bodes well for the market.
What has not been confirmed is this: is this due to the Federal Reserve lowering rates or not? GDP for the fourth quarter has been revised upward as well. If the consumer comes through and corporations change sentiment, then this number should hold or move in the positive. This record rally seems positioned to run through year end as the optimism builds for a trade deal.
I wish all of you a Happy Thanksgiving with your family and friends. I am am thankful for the current position in which our market and the economy of our nation finds itself.
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