Positive news about Black Friday's sales numbers propelled equity indices up sharply yesterday. The S&P500 Index rose 2.92% on the strength of the information.
However, as a Wall Street Journal article explained, there's actually little correlation between Black Friday sales and sales for the entire holiday season. It mentioned the 2008 holiday season, when Black Friday sales were up 3%, leading estimates for the entire season to be increased to 7.2%, only to see the actual data come in at -4.9% for holiday season spending.
Moreover, as I watched CNBC's coverage of the unfolding Friday shopping, guest hosted by well-regarded retail analyst Dana Telsey, it was clear that people were out shopping because of the large discounts being offered. Telsey admitted that this season's sales would be low-margin in nature but that, due to falling commodity prices, hopefully 2012 would be 'the year of the margin.'
Meaning that Black Friday's sales were robust because many people were out taking advantage of sales. And this is good news? This is going to fuel a long-lived US economic expansion?
I doubt it.
Another reason for yesterday's equity index performance was reported to be, as one analyst coined the term, 'hope-ium' that Euro governments discussing coordinated, tougher and enforceable fiscal policies would eventually resolve that trading bloc's sovereign debt woes.
If that isn't a pipe dream, what is? Looking at the reactions of the populace in Greece and Italy to austerity measures, what do you think will occur if/when the same is applied to Spain and France?
As I write this, the S&P futures are up to 1194, presumably on the news that Cyber Monday sales were 15% higher than last year.
Again, fine for a passing S&P500 rise, but suspect as the source of lasting US economic expansion. As a friend of mine opined last night regarding the holiday sales reports, and his own experience at a crowded restaurant over the weekend,
'It seems like if you have a job, you're spending. But if you don't, it's a different story.'
Just so. And with broadly-defined, actual US unemployment between 15 and 16%, and real median income for the past decade flat, that doesn't seem to be an improving underpinning for the US economy going forward.
US equity indices reflect global economic activity, so they may outpace US economic growth. But Europe's slide into recession should concern investors looking at the global GDP outlook.
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