Last week, the Dow notched its third record-setting session; big winners include material and industrial names I’ve been pounding the table on. Make sure you have exposure. Of course, Amazon (AMZN) was the biggest winner while brick-and-mortar retail along with food companies were huge losers. 

Thus far, all the economic data has come in below estimates as an ugly theme, and it’s rearing its ugly head. President Trump even hit on it with an early morning tweet last Friday.

Donald J. Trump‏

Despite the phony Witch Hunt going on in America, the economic & jobs numbers are great. Regulations way down, jobs and enthusiasm way up!

President Trump’s tweet on the economy and jobs were spot-on, but they are in danger from the unrelenting battle to delegitimize the election. The swamp is fighting back and our economy is losing.

Their dark clouds are beginning to hurt our economic revival. Last week saw a string of economic data come up short, mostly putting the economy and underlying enthusiasm back to pre-election levels.

Friday’s Consumer Sentiment Survey came in significantly below Wall Street consensus to the lowest level since last November. 

Consumer Sentiment	June 2017	May 2017	Change
Index of Consumer Sentiment	94.5	97.1	-2.7%
Current Economic Conditions	109.6	111.7	-1.9%
Index of Consumer Expectations	84.7	87.7	-3.4%

 

The big turn began after June 8th when millions watched former FBI director James Comey testify before the Senate Intelligence Committee:

• 97.7 Before June 8th
• 86.7 After June 8th

What’s disheartening is that there are signs of self-identified Republicans who are losing faith that the swamp can be drained.

• GOP -9.2%
• Dem -6.8%
• IND -11.2%

Despite the strong turn in the economy and its clear traction – it’s proven via hard data- and President Trump’s strong social media platform the fact remains; the deluge of negative press, coupled with investigations and constant innuendo in Washington, D.C. is taming down on optimism.

Call it a: “Death by a thousand cuts.”

Experts tell me this could drag on for years - our economy cannot afford it, and this means it’s urgent that all the Intelligence committees along with the Special Counsel bring some closure to their investigations immediately. 

Coup de grace

The Amazon offer for Whole Foods continues to reverberate.  The carnage in shares of companies in the grocery space was crushed. Mostly, the brick-and-mortar retail took it on the chin. Some of these names are oversold such as Costco (COST), which has moved to the top of our Buy-the-Dip list. The question remains: is this a deathblow to brick-and-mortar retailers?

Although May retail trends are clear, they directly correlate with the migration to online shopping.

Losers

• Department Stores -4.7%
• Sporting Goods -4.1%
• Electronics -1.8%

Winners

• Building Materials +7.7%
• Furniture +3.4%
• Food and Beverage +1.9%

On the one hand, it’s clear the shift to online spending has gone into overdrive with mobile demand soaring. Thus far, one of the hardest niches for online retail to break has been food and beverage stores.

There are numerous reasons for this, including the tiny margins already endured by the industry. On the other hand, with this new development, Amazon (which has also entered the furniture arena) has sent a message that no area in brick-and-mortar is safe.

By the same token it's unlikely Amazon is investing $13.7 billion to shutter brick-and-mortar rivals. While the talk of distribution centers has come with its credence, these are buildings where people walk through the door prepared to pay premium prices. The essence of business 101 is to create a business where people will pay more.

With that in mind, there are other “good fits” out there between the two platforms.  Moreover, maybe the brick-and-mortar world will start merging in order to fight back and to survive.

Not only will it be profitable, but it also will be compelling to watch.  

Last week, LinkedIn asked me to write a piece for Father’s Day.  It got a lot of traction and while it’s belated, it’s here for those that didn’t get a chance to read it. This will be the first Father's Day without my dad, a man I waited so long to know. Published on June 16, 2017 https://www.linkedin.com/pulse/first-fathers-day-without-my-dad-man-i-waited-so-long-charles-payne

 

Today’s session

Stocks are looking to open higher after a tough few days for Technology and other smaller niches of the market.  The Journal is giving some credit to the French elections, which should lead to major tax reform in Europe’s second largest economy.

The Dow will open at a new all-time high and I think Blue Chips will find more buyers looking for higher quality names in their portfolios.

There are additional changes that are part and parcel of rotation, but winning themes including owning tech is not done yet.

Comments

Enjoy you twice every week day that the market is open, but I especially enjoyed your tribute to your Dad. So glad that you called him last Father's Day. I still remember "Old Spice" as well. God Bless you Mr. Payne...we trust you over everyone. Susan on 6/19/2017 10:31:49 AM

What a beautiful tribute to your father. Thank you for sharing Jim Johnson on 6/19/2017 10:33:54 AM

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