The Customer Is Always King
Economic indicators fit together in a daisy chain, with a domino effect impacting each to the next. Most stock market moves can be traced back to economic indicators, including the most important of all, consumer spending. The average Joe on the street drives two-thirds of the economy with his appetite to go shopping, with the final third being driven in the wrong direction by other factors!
The trade war has stifled investment, for instance, and manufacturing and service data came in below expectations last week, serving as another example. Right now, the most critical support beam to the American industrial machine is consumer spending, and it’s driven by payroll numbers, wages, and prevailing sentiment! The US Commerce Department spilled the beans on it last week.
Buying habits at a grassroots level seized up 0.3% this month in their first decline since February. However, most of the damage was contained to vehicle and gasoline sales, which many investors are calling bluffs on anyway. Gas sales were only down on a dollars-spent basis because of lower prices, not lower demand. Online sales did admittedly fall short, but Nationwide’s chief economist believes “a lot more than one month’s data” should be digested before the market jumps to conclusions!
So, remember that if anything really bad happens in the investing world, don’t tell the consumer! Luxury shoppers and paying guests may become our last bastion of hope if the trade war rages on…