Most Wall Street investors are betting that consumer staples stocks will benefit if inflation continues to fall and retail sales remain strong, especially as Black Friday approaches, the biggest shopping peak in the United States. year.
Stocks in the consumer discretionary sector, which includes Amazon, electric car maker Tesla and Target, weakened on higher prices, and the Standard & Poor’s index fell nearly 33% in 2022, compared to a decline of about 17% for the broader index.
Recent data has shown signs that inflation may ease in the face of a stronger-than-expected surge in retail spending, adding to cautious optimism that the economy may avoid recession or face only mild deflation.
The biggest weekly streams
Investors pumped $1.05 billion into consumer discretionary stocks last week, the sixth-largest weekly inflow since 2008, according to data from Bank of America Global Research.
As for the extent of purchasing power, the vision is expected to become clear to investors in the upcoming “Black Friday” on the extent of consumer interest in spending; It is the day after a national holiday in the United States and is traditionally one of the busiest shopping days of the year.
Some analysts are optimistic about the performance of the Nordstrom and Target chain stores, as regards the sector as a whole, believe it is too early to bet on it, because inflation is still high by historical standards, while many on Wall Street fear that the Federal Reserve’s tightening of monetary policy could lead to a recession in the United States.
Lots of challenges
Consumer stocks have faced many challenges this year. Shares of “Target” fell on Tuesday after the company reported the occurrence of “radical shifts” in consumer behavior hurting demand, and this company’s shares are down 29.6% year-to-date, while shares of “Amazon Dot” are down. com, the world’s largest online retailer, with a 43.5% share, and Amazon warned on Oct. 27 that it was bracing for slower growth as people were tightening their budgets due to inflation.
In a note on Friday, Morgan Stanley economists said: While retail sales were strong in October, data suggests delinquencies on subprime auto loans are on the rise and high-income buyers are starting to make less shopping.
They said the consumer has been a pillar of strength this year, but as prices continue to rise and the job market slows, they will have no choice but to cut back on spending.
a state of optimism
The bank’s analysts downplay the consumer discretionary business, while others see reason to remain optimistic even with the prospect of an economic downturn; They feel that recession fears are too calculated for this group.
They have indicated that the recession, if moderated, will go very well from now on and are betting that retailers, hotels and restaurants will outstrip the rest of the industry over the next few years. It is possible that the low valuations of some companies will change investors’ minds if the economy slows down.
On the other hand, signs of consumer purchasing power could be a wake-up call for the Fed, which is fighting inflation, bolstering its position to proceed with monetary policy tightening that has put pressure the markets and put an end to risk appetite.
The most important economic events of the week
Monday 21 November
8:30 a.m. Fed’s Economic Activity Index
Wednesday 23 November
8:30 am… Durable Goods Orders / October
8:30am… Core Capital Goods Orders/October
8:30am: Initial jobless claims for November 19th
8:30am: Continuous jobless claims for November 12th
10:00…University of Michigan Consumer Confidence Index/November
10am…University of Michigan 5-Year Inflation Forecast (Final)
10am: New Home Sales (seasonally adjusted annual average)/Oct
14:00 Minutes of the meeting of the Federal Open Market Committee
Thursday, November 24 .. Thanksgiving (holiday)
