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Afternoon Note

Focus on the American Consumer

By Charles Payne, CEO & Principal Analyst
11/21/2018 2:03 PM
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I know volume is light, as this session has taken on the feel of a Friday before a three-day weekend, but I’m impressed with attempts to gain equilibrium.   Energy is the big winner with a strong bounce in crude oil, as it’s a foregone conclusion OPEC will cut production. 

I’m focused more on Consumer Discretionary names, retail has endured a tough week.  Today’s top five winners are in two categories.


Severely Beaten Down:

Communication Services is getting a nice lift from Facebook (FB), Google (GOOG) and Twitter (TWTR), but Netflix (NFLX) is lower.  As the market attempts to regain its footing, names that continue to struggle become more worrisome for investors.

S&P 500 Index



Communication Services (XLC)



Consumer Discretionary (XLY)



Consumer Staples (XLP)



Energy (XLE)



Financials (XLF)



Health Care (XLV)



Industrials (XLI)



Materials (XLB)



Real Estate (XLRE)



Technology (XLK)



Utilities (XLU)




With all the focus on the American consumer, we saw two key news items today.

University of Michigan’s monthly Consumer Sentiment reading of 97.5, was down from 98.6 in the prior month and lower than consensus of 98.3.

But, the most important items:

  1. Lower Income Americans getting piece of the action and loving it.
  1. Consumers will stop spending if the Fed blows it!

Consumers' interest rate expectations have always traced the outlines of economic cycles (see the chart). As expansions lengthen, the number of consumers who expect interest rate increases gradually rises. After some threshold is reached, however, consumers in large numbers abruptly anticipate future declines in interest rates.

While there is no reason to anticipate a sudden change in interest rate expectations in the next few months, it is still an important task for the Fed to avoid hitting the threshold that causes widespread postponement of purchases.

United States Consumer Sentiment

Online spending is surging according to Adobe Analytics.  From November 1 to November 20, online spending hit $31.9 billion. 

Coming into November, Adobe forecast $124 billion from November 1 to December 31 with online climbing 14.8% and non-online +2.7%.


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