Well, la-dee-da. Imagine that! Early on the first day of trading in 2014, the market does a bit o’ rebalancing. The big three indices are down and the VIX and gold are up. The market opening on the downside and both of these “fear” gauges going up, even with good economic news coming out, suggests the market is a bit tentative going into the new year. Maybe so, and maybe that is okay, as a market adjustment now and then is both healthy and needed. The future, however, is still bright, as the US consumer is still in the game, swinging away with a bit more power.
- Consumers are spending more. Government figures show monthly personal consumption has risen for seven straight months, with November’s outlay marking the fastest increase in five months.
Interestingly, the consumer is spending, but not in the traditional settings, at least not as much he or she used to. It appears the trend toward online shopping is becoming stronger.
- According to data compiled by Reuters, brick and mortar stores now capture just $3.37 of every $100 of U.S. retail spending, the lowest since records began in 1992, when the number was nearly $9.
The numbers above reflect certain categories of retails sales, such as clothing, sporting goods, and accessories, which, ultimately, represent a smaller percentage of overall consumer spending. The higher percentage of money spent is in big-ticket items, which, well, really don’t sell well online (at least cars and houses anyway). Nevertheless, these retail products are finding their way to the consumer.
- U.S. sales of big-ticket items such as autos and home-related goods such as washing machines, as well as purchases in home-improvement stores, surged in 2013, boosting overall retail sales. Homes sales also increased pretty steadily from mid-2012, although a summer spike in mortgage rates cooled things off a bit this fall.
The bottom line today is the market is taking a breather, at least for the morning. As I write, the DJIA is down triple digits. Yet, how long can that go on when the global economic picture is brightening year over year and month to month?
- Global manufacturing ended 2013 on a strong note as major exporters like Japan, Germany and Italy posted their fastest growth in years.
- Euro zone manufacturing grew at the fastest rate since mid- 2011 in December on brisk business in Germany and Italy, Markit Purchasing Managers’ Indexes (PMIs) showed.
- According to Markit, the Eurozone PMI continues to improve while the Italian and Spanish PMI’s hit their fastest rate of expansion since April 2011 and March 2011 respectively.
- Add in the fastest growth in 7 1/2 years for Japanese manufacturing and no major slowdown in Chinese manufacturing output, and the stage is being set for a solid start to the year.
All in all, even with the market down today, 2014 is off to a solid beginning, perhaps the best start since 2006. Given that, look to technology and the financials to gather steam early on in the year. As well, the automakers will likely have a good year, as will the alternative energy sector. Heck, there is more opportunity out there when the global economy is beginning to chug, but the three I mentioned are good starts.
Trade in the day; Invest in your life …
