Bellevue Perspectives

Retail is Back, At least in the United States


The August reports from Walmart, Target and Lowe’s were all above Wall Street consensus. The United States consumer is alive and well and spending money. The consumer accounts for over two thirds of all economic growth in the United States which means the inverted yield curve likely isn’t flashing a recession signal just yet. The United States is in a good position to fight a trade war with China, especially if President Trump is able to pressure the Federal Reserve to lower short-term interest rates further. The bull market for stocks in the United States seems safe for now.

A sharp decline in interest rates also helps juice the economy as consumers refinance their mortgages and end up with more money in their pocket to spend and stimulate the economy. We are seeing refinancing activity pick up for clients.

What is not to like. The strength in the US dollar is not helping the world economies. The dollar remains higher versus other world currencies making it more expensive for other countries to export or sale their goods to the United States. A weaker dollar will open up other markets to US companies which would also help sustain the current economic expansion. It would also help sales growth of US based multinational companies.

Looking for signs of a recession?  Negative economic growth must appear. This seems unlikely in the next 6-12 months. Recall a recession is defined as two quarters of negative economic growth. Plus, few are talking about Boeing. Boeing’s production accounts for 1/2 to 3/4 of a point of economic growth, so getting their 737 Max back online will add even more to the US GDP(Gross Domestic Product) numbers.

Finally, President Trump is talking about a payroll tax cut to further stimulate the economy and adding a more favorable tax structure for capital gains which would further stimulate investment. August and September are traditionally difficult months for the market, but this year may be different especially if the United States and China can strike a trade deal.

We remain concerned about growth outside the United States and all the countries with negative interest rates. Growth in Germany and Japan continues to struggle. Germany announced a stimulus plan recently aimed at pulling their stagnate economy out of a potential recession. Keep your eyes on Germany to see if their stimulus works. Germany has an old stodgy economy and likely will eventually wake up from its declining growth scenario at some point. Japan has similar challenges reigniting their growth due to their work force demographics.

Looking forward, the bull market in the US equity markets looks solid and should continue for another 6-12 months even without a trade deal with China and an inverted yield curve.  Retail sales in the United States tells us the consumer is strong. And GDP growth likely will move higher especially if Boeing is cleared to start flying their 737 Max soon.

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All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.