12/2/13 – Cyber Monday Begins

Posted by Brad McMillan, CFA, CAIA, MAI

Find me on:

This entry was posted on Dec 2, 2013 8:26:03 AM

and tagged Commentary

Leave a comment

I hope everyone had a great holiday. I certainly did, as my sister and her family hosted us for a wonderful Thanksgiving dinner and very fun weekend. Thank you, Beth and Kevin, and thank you, Jake, Jesse, and Max.

Retailers apparently didn’t have as good a time. Today’s headlines are largely about sales being down for the weekend as compared with last year—with the proviso that they’re expected to be up for the season as a whole.

This seems reasonable, if you take a detailed look at a couple of factors. First is the much larger number of sales, starting much earlier. On top of Black Friday, we now have sales on Thanksgiving itself, online sales, Cyber Monday, and everything else. Other things being equal, of course, sales over any given period may be less, even as total sales growth turns out healthy.

The other, macro factors here are also more supportive. As I’ve mentioned before, consumer income has increased more than consumer spending over the past couple of months, so there is the ability to spend more. Consumer borrowing is also starting to tick up, which should provide more support. Consumer confidence just reported a tick up as well, after a multiweek slide caused by the government shutdown. Confidence recovery should aid in increasing spending.

There are, however, reasons to worry. Much of the gains have come to the higher-income cohorts, with less-affluent consumers continuing to be squeezed, which is hurting sales at Walmart and Target. Those consumers substantially outnumber more affluent consumers, which could result in a decrease overall, even as affluent shoppers continue to spend.

Ongoing improvement in the employment numbers should help ameliorate this, as the lower-income cohorts have disproportionately higher unemployment rates. Faster wage growth, which is starting to accelerate, should help as well.

Nonetheless, the possibility of a disappointing holiday season, from an economic perspective, remains. While overall sales figures should still come in higher, the differentials in the employment recovery and wage gains stand to benefit the affluent, and the stores that cater to them, more than the less affluent.

The other reality is that, even if sales increase overall, the profits for retailers will be eroded by increasing competition. The blast of sales starting in early November, and even before, reflects that retailers have to fight ever harder for each consumer dollar—and that profits may suffer accordingly.

As we enter the holiday season, it seems likely that consumers will continue to spend as much, or more, than they can afford, but that it will be a series of more carefully considered purchases, with a greater focus on prices and sales. Retailers may end the season less cheerful than shoppers.

Upcoming Appearances

Tune in to Bloomberg Radio's Bloomberg Businessweek on Friday, February 28, at 3:45 P.M. ET to hear Brad talk about the market. Stream the show live at https://www.bloombergradio.com/, listen through SiriusXM 119, or download Bloomberg's app, Bloomberg Radio+.

Tune into Yahoo Finance's The Final Round on Thursday, March 12, between 2:50 and 4:00 P.M. ET to hear Brad talk about the market. Exact interview time will be updated once confirmed. Watch at finance.yahoo.com

Subscribe via E-mail

New call-to-action
Crash-Test Investing
Commonwealth Independent Advisor

Hot Topics

Have a Question?

New Call-to-action

Conversations

Archives

see all

Subscribe

Disclosure

The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly into an index.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.  

Third party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided at these websites. Information on such sites, including third party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation.

Member FINRASIPC

Please review our Terms of Use

Commonwealth Financial Network®