For Immediate Release
Chicago, IL – August 5, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Wal-Mart (WMT), Family Dollar (FDO), TJ Maxx/Marshalls (TJX), The Gap (GPS) and T. Rowe Price (TROW).
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513
Here are highlights from Tuesday’s Analyst Blog:
Personal Income Falls
If not for government automatic stabilizers and the Stimulus Bill, the overall trend in incomes would be much worse. Demographics are part of the reason that the savings rate is going up, since the Baby Boomers are in a scramble to save for retirement, which is right on the horizon for most of them. If they don’t save (or unless the housing market miraculously turns around and forms another bubble), large numbers of them will simply be unable to retire. The competition for Wal-Mart (WMT) greeter jobs will be intense and sales of cat food will soar (and not for Mr. Whiskers, either).
In large part, the economic growth of the 1990’s and the first part of this decade were a mirage driven by the falling savings rate. This is now being reversed and the economy faces a serious long-term headwind because of it. Keep in mind, though, that once people retire, their savings rate tends to go negative as they live off what they had accumulated over their lifetimes. Thus in about five years, demographics will be forcing the savings rate back down again.
On the plus side, the higher savings rate means that we are capable of funding more of the growing federal debt internally, rather than borrowing from China and OPEC. The rise in personal savings is being offset by an increase in government dis-savings, otherwise known as the budget deficit.
Net-net, though, the overall national savings rate is still going up, but not by nearly as much as the chart indicates. Then again, keep in mind we were running pretty hefty budget deficits even when the personal savings rate was close to zero. That was the combination that led to the country being deep in hock to China. We are still going into more debt abroad, but at a slower rate than we have been in recent years. This is borne out by the shrinking trade deficit.
Long-term, the need to increase the overall personal savings rate is going to be a major negative for the retail industry and all others that depend on discretionary spending. In the short-term, however, I would note that the retailers in general have come in with better-than-expected earnings (very low expectations going in) and are getting estimate increases for this year (and next year to a lesser extent). Still, it should slow their overall long-term growth rates, and as a result should cause them to trade at lower relative P/E’s than they have in the past.
I continue to see retailers that cater to the middle class as being the most vulnerable. Discounters like Family Dollar (FDO) and TJ Maxx/Marshalls (TJX) are likely to pick up share from chains like The Gap (GPS). Yes, there will be some pick-up as the economy finds its feet again, and the effects of the Stimulus Bill are likely to be much bigger in the second half than they were in the first half.
However, this is not going to be a V shaped recovery. History, both domestically and abroad, has shown that recessions caused by financial panics and balance sheet issues tend to last longer and lead to weaker recoveries than do recessions caused by the inventory cycle or by tight monetary policies.
Higher savings rates mean that people will be contributing more to their 401K’s and IRA’s. This should be good news for asset management firms like T. Rowe Price (TROW), so it is not like there will be no offsets to this trend.
Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks “Profit from the Pros” e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it’s your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com
