I've got a song, I ain't got no melody
I'ma gonna sing it to my friends
I've got a song, I ain't got no melody
I'ma gonna sing it to my friends

Will it go round in circles
Will it fly high like a bird up in the sky
Will it go round in circles
Will it fly high like a bird up in the sky

BILLY PRESTON

The perfect theme song for a week that’s seen the Dow Jones Industrial Average up 200 points one day then down more than 200 points the next day, and yesterday, it was up 85 points then down 86 points only to close unchanged for the session.  But make no mistake, while the Dow finished slightly in the green, there was serious carnage in the S&P 500 and NASDAQ.

On the topic of carnage, the retail sector continues to get walloped as Nordstrom’s (JWN) posted earnings of $0.26 after the close, but the street modelled for $0.45.  In addition to the seismic miss, management lowered guidance for the full year.  The stock will joins Macy’s and Kohl’s in the disaster bin when it opens, perhaps at its lowest level since 2011.

So what is the deal with consumer spending?   The last couple of weeks have been hell on retailers, big and small, as earnings continue to disappoint.  The overarching question and narrative is whether the consumer is tapped out.   There’s no doubt a debt-laden society experiencing declining wages couldn’t be expected to shop forever.  (Ironically, many think our government can suffer static growth and mountains of debt and just print fresh cash to make it all better.)

In the 1990s, spending on a year over year basis grew faster than incomes in all but two years.  Since 2003, it’s been the opposite as income growth has generally outpaced spending, a trend that’s become even more pronounced this year.  People are saving cash and skipping the mall.  What does it mean for retail and the overall economy?   For sure people are spending less and saving more, and some of that comes from the scares of the Great Recession, but it’s gotten so much worse in the past year.

 

I’ve pointed out how all of a sudden personal savings rates have soared this year but are a long way from the total amount squirrelled away at the onset of the great recession.

 

 

Politics

As we near November, I’ll try to handicap the race for the White House and the potential implication for the economy and the stock market more often.

The Big Powwow

Yesterday was all about the big powwow between House Speak Paul Ryan and presumptive GOP nominee Donald Trump.  One newspaper is calling the outcome a ‘modus vivendi’ between the two, although it if feels that it’s the first step toward ultimate bonding and full-throated endorsement.   But the GOP nominee may have to make some concessions to make it happen.

From what I gather, Ryan is less eager to win concessions on policy as he is to have Donald Trump carve out room for core conservative principles on the GOP Platform.  That said, altering policy underscores a commitment to principles.  I think we will see modification on the Muslim ban and clarity on taxes.  I get that Ryan is playing with a weak hand, but when it comes to getting laws through the system, his hand is stronger than many people realize.

Ryan’s Agenda
Core Principles	Policy Positions
Limited Government	Ban Muslims
Constitution	Mass Deportation
Separation of Powers	Trade War
Pro-Life	Taxes

Coming out of the meeting, Trump and Ryan say they are ‘totally committed to working together.’

Overnight, Donald Trump took aim at Amazon (AMZN), and the company’s “unfair advantage,” which is worrisome to me as those are the kind of statements made before legislation is taken to stop or breakup that unfair advantage.

On the democrat side, there are so many scathing articles out in the last 24-hours on Hillary Clinton and the Clinton Foundation she might ask the media to stay focused on Benghazi. Interestingly, more Wall Street folks are telling me they’re leaning toward Hillary.

A cynic would say they should since they’ve invested so much money into her already.

Today’s Session

More bad news in retail as JC Penny, which seemed to have escaped certain death, posted revenues that came in short of consensus and offered lower gross margin guidance.  Meanwhile, the retail sales report for April came in at +1.3%, beating consensus of +0.8%, and ex-auto +0.8, against consensus estimate of +0.5.

Equity futures are still under pressure, making this session the perfect test to see if any cash comes off the sidelines.

Comments

I don't know why you are surprised by the masses squirreling away money as we approach the elections. With every candidate that drops out, the scene looks worse for working Americans. We are now down to just one candidate who can clearly see the need to spend less than you pull in when $20T in debt. And he will be the next one to be gone. And we will be down to 2 Demoncrat candidates with no management experience and an independent running as a Republican who has no maturity and who has never run an organization larger than a few people. He is the closest to a businessman of the 3, but sadly lacks any real management experience, but instead made his fortune by wheeling and dealing and bravado instead of the skills we need to run the government. It is doubtful any could be as grossly incompetent as the big Zero, but not likely that any of them will help the economy move away from shutdown either. Bob on 5/13/2016 12:23:59 PM

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.