“Popular culture is a place where pity is called compassion, flattery is called love, propaganda is called knowledge, tension is called peace, gossip is called news, and auto-tune is called singing.”
- Criss Jami
We are living in interesting times where news platforms have become weaponized, but more so to annihilate a competing point of view than promote affirmations of a favored ideology. This skewed analysis of the world has actually made the world more skewed.
Nowhere else are we seeing this other than in the financial world and the stock market.
Rumors are elevated to a headline status, and non-stories become top stories by connecting fabricated dots rather than facts. They become part of the 24-7 news cycle, and from time to time, erupt like the story of President Trump taking on Amazon.
It’s no secret that President Trump has a bone to pick with Jeff Bezos, the owner of the Washington Post, over unflattering reporting and too many false reports since he decided to run for the White House. However, the Facebook fiasco was another excuse to roll the story out again.
Even though the White House denied it was actively working on ways to curb Amazon’s reach, Wall Street couldn’t shake the story, which had been around for more than a year in the rumor mill. Consequentially, Amazon shares stole the spotlight from Facebook, which still faces the wrath of an entire planet, not just an angry president who has been victimized by biased reporting.
So, how do investors survive these kinds of environments? I have one answer:
Don’t Panic
There’s an even better question. How do investors profit from these kinds of environments? I have one answer:
Buy the Dip
The market was all over the place on Wednesday with the Dow Jones Industrial Average, once again relinquishing a 200+ point rally only to stumble into the closing bell. The good news is that a massive sell-off was averted. Moreover, we were reminded of the strength of the U.S. consumer, which helped to power the final read on the fourth-quarter Gross Domestic Product (GDP).
That said, the savings rate slipped to 2.6% from 3.4% in the preceding quarter, and 3.6% a year earlier. This isn’t a great sign, but people are more confident when their paychecks are rising, and the stock market is on a historical run.
Moreover, the question is whether consumers have the ability to keep spending and to keep driving the economy. I say that the answer is yes, considering the employment and wage trends and the ability to stretch even more.
The U.S. financial obligation service payments as a percent of disposable personal income, and the financial obligation ratio (FOR) is still at a reasonable level.
FOR Components:
Mortgage debt
Consumer debt
Auto leases
Retail payments
Homeowner insurance
Property taxes
So, between an embolden consumer and perhaps a more humbled Amazon, brick-and-mortar retailers rocked yesterday and have more room to run. Also, it was the beaten down names that enjoyed the biggest moves:
- (SHLD) Sears Holdings Corp +12%
- (JCP) J.C. Penney +5%
- (M) Macy’s +4.3%
Oversold consumer staples enjoyed strong moves as well:
- (CLX) Clorox Co +3.0%
- (CVS) CVS Health Corp +3.5%
Of course, those retailers with huge short positions rocked, led by a name I’ve mentioned a lot – Restoration Hardware (RH)+22%.
I’m not sure how the market acts in front of a three-day weekend that includes Passover and Good Friday tomorrow, and Easter on Sunday, but this selling is overdone, and everyone should be ready to pounce.
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