These Strong US Retail Numbers Are Old News to the Market

The US is the world’s largest economy.

You need to know what’s going on there.

But if you really want to find out, don’t ask an economist.

They’re the last person you want to speak to.

Their stats and figures will often mislead you.

A long line of economists are warning of a major market collapse.

And it lies just around the corner.

What they say sounds compelling because they give all the stats and graphs to support that view.

But here’s a different way of going about it.

To find out where the US economy sits right now.

Who to Really Ask About the US Economy

Don’t get the view of the economist, ask the consumer.

How’s she feeling right now about the US economy?

Because if there’s trouble in the economy, it will show up there.

If the consumer is stretched, squeezed or just plain scared about what the future holds, they will stop spending.

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So, if things are as dire as some economists warn, we should see some belt tightening going on.

TIME magazine reports last week, American’s are splashing out cash to dine at restaurants like never before. We’re not talking about a small rise either. Spending at US restaurants has been at record highs the last three months.

Not a lot of belt tightening going on there. Consumer looks okay from that angle.

That’s dining, but what’s going on in retail?

If consumers are feeling the pinch, retail earnings should be softening.

The July retail figures came in last week. Last month showed retail sales were up strongly and growing at a pace of 4.9% year on year. Online and other non-store sales were up 11.3%.

That tells you heaps about where the world’s largest economy sits right now. American shoppers seem a little less concerned about the worries of the economists.

On the US economy, the US consumer is voting with their feet.

But realise this.

When you hear in the press that US retail sales are booming, that should not surprise you.

Not if your following the stock charts anyway.

US retail stocks have been on the move all year.

The good retail numbers now coming out are old news to the market. 

You have to understand this process, if you want to be a better investor.

This is why in some US retail stocks are falling when they’re reporting earnings results.

The good news is out and some of these retailers are now fully priced.

A good example of this is iconic US retailer Macy’s, which reported earnings last week.  From the low in November last year, the share price has more than doubled.

The good retail numbers that came out last week, is not news to the market. This is why the Macy’s share price has doubled in short time.

When they reported last week, Macy’s smashed earnings estimates. The retailer reported sales growth and raised its earnings outlook for same store sales.

Yet the share price tanked.

The reporters try and explain it away. They’ll find some small weakness in the numbers. Or cite investor concern about the retail outlook. Or, they’ll simply say, investors were unimpressed with the results.

But you have to understand this.

It’s not that the strong earnings failed to impress investors. It’s more that the market knew those good numbers long ago. And unless there’s more immediate good news to come, the share price is likely to fall, rather than rise, as many investors expect.

Don’t Read Too Much Into Share Price Falls…

So don’t read too much into the share price falls as some of these US retailers report earnings.

Going by the retail numbers, I’m not so sure the consumer is feeling the squeeze.

The charts just don’t suggest it.

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This is your advantage in markets. To read the economy through the charts. It allows you to find out what’s really going on.

Retail stocks being so strong this year, tells you a lot about the US economy.

And whilst that’s going on, it was always unlikely the US economy would collapse this year. Despite what you read to the contrary.

And really the strong retail numbers only mirror the big picture outlook.

So far I’ve talked all about the US consumer spending.

But not only is the US consumer spending, they’re also saving.

The Wall Street Journal reports personal saving rates in the US are being revised up. More than doubling the prior estimate.

You just wonder where a market collapse will come from when you read these sorts of reports.

If a collapse was just around the corner, you’d expect to see company layoffs rise. A hint that the economy is under stress.

And when we look at the initial jobless claims what do we find?

Bloomberg reported last month jobless claims fell to 50-year lows. To find unemployment lines this small, you have to go all the way back to 1969!

How can one call a market collapse with any confidence whilst this is going on?

The US economy is in fair shape just now, to say the least.

That’s not to say there might not be storm clouds brewing on the horizon.

If you look at what happens when the Fed starts raising rates, it’s roughly three and a half years on average, from when the Fed starts to raise, that a recession is likely to occur.

The Fed started raising in December 2015, so that perhaps gives you something to watch for. Perhaps some sort of slowdown to come after mid-2019.

But don’t go expecting another 2008.

If you want to know why I can be so certain about that, then go here, to find out more.

Terence Duffy,
Chartist, Phil Anderson’s Time Trader

Terence Duffy is an analyst and chartist, specialising in researching economic trends and cycles.  His primary focus is housing and land affordability. But you can also depend on him to offer his unique analysis of stock market charts. As Terence will show you, the charts often forecast, well in advance, the good or bad news to come — which he details in Cycles, Trends and Forecasts.

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