HAPPY HOLIDAYS!
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Christmas sales spins
Yesterday I posted the Bloomberg headline Holiday Sales Jump 8.5% as U.S. Consumers Return to Retailers and Mastercard SpendingPulse data saying that “U.S. holiday sales jumped 8.5% from last year” but noted that the period considered was Nov. 1 to Dec. 24.
I warned that “Retail sales were up 16.1% YoY in November. Control sales were up 13.6%. Seems December was rather weak…”
Well the Associated Press picked up the “Bloomberg news” and broadcasted it all over with this headline:
Despite supply issues and omicron, holiday sales rise 8.5% Holiday sales rose at the fastest pace in 17 years, even as shoppers grappled with higher prices, product shortages and a raging new COVID-19 variant in the last few weeks of the season, according to one spending measure.
Today, Axios takes the spin one step further with “Shoppers defy Omicron”: Holiday sales rose at the fastest pace in 17 years (…) despite higher prices, product shortages, and the rise of Omicron in the season’s final month.
If you don’t pay attention to the period, you are left with the strong impression that sales are indeed pretty strong in spite of all the headwinds and that the U.S. consumer is spending merrily.
But if “holiday sales” are up 8.5% as Mastercard data says, it means that December sales are up only 0.9% YoY, before inflation which is now running in the 5-6% range (5.5% in November). If so, real retail sales would be down 4-5% YoY this month.
J.P. Morgan updated its Chase consumer card spending tracker through December 21 which includes the last shopping weekend. It ain’t jolly:
And it’s not mainly Omicron-impacted Airlines and Travel and Entertainment. Chase estimates that control sales are down 11.3% MoM in December but adds this important caveat: “Given discrepancies between seasonal patterns with the Chase card spending data, we believe the December tracker forecast substantially overstates the decline after seasonal adjustment”.
Let’s hope so!
China Injects Most Cash in Two Months, Triggering Gains in Bonds
It’s December 1999 Based on the NYSE Shares Touching New Lows
Last week, when the S&P 500 closed at a 52-week high, 334 companies trading on the New York Stock Exchange hit a 52-week low, more than double the amount that marked new one-year highs. That’s happened only three other times in history — all of them in December 1999, according to Ramsey, who is chief investment officer for Leuthold Group.
And it’s not just a one-week phenomenon: NYSE new lows now also outnumber new highs on a six-week moving-average basis. The last time that happened as the S&P 500 hit a one-year high was in July 2015, right before a six-month correction that saw the index lose around 14%. (…)
But Ramsey says that his analysis doesn’t mean a correction is imminent. The smoothed-out six-week moving-average condition happened several times throughout 1999 up until March 24, 2000, when it “proved to be the final nail in the coffin.” (…)
- Pandemic Tech Darlings Turned to Duds in 2021 Those former tech sweethearts that experienced a reversal in fortune this year could remain in the dumps in 2022
The Nasdaq CTA Internet Index is in the red this year compared with a return of more than 27% for the S&P 500. Cathie Wood’s famed ARK Innovation ETF, more than 30% of which was invested in information technology as of Sept. 30, has seen its net asset value decline 21% this year, underperforming the S&P by nearly 49 percentage points.
She isn’t alone. If you invested in enough tech stocks this year, you probably got burned by a few of them. Select lowlights include fitness-equipment company Peloton Interactive, down nearly 75% this year; social-commerce company Poshmark, down almost 82%; and education-tech company Chegg, down 66%. At certain points, the number of names blowing up simultaneously was dizzying: Chegg, Peloton, Zillow Group and Vimeo all took nosedives around their most-recent earnings reports, collectively erasing some $26.3 billion in market value in a single week last month. (…)
If the tech sector has to earn its gains next year, many of its stocks still face an uphill battle. (…)
If the early pandemic was about trading on stories, many of these companies seem to have lost the plot.
- Gigantic Stocks Are a Reason to Worry As Apple, Microsoft and Amazon cross the trillion-dollar mark, index investors should be concerned about concentrated portfolios
(…) Would you rather own the iPhone maker or all of McDonald’s, Walmart, AT&T, Philip Morris, Berkshire Hathaway, Procter & Gamble, JPMorgan Chase, Starbucks, Boeing, Deere and American Express combined? A lot would have to go wrong all at once to torpedo that diversified group of blue-chip stocks.
(…) Dimensional Fund Advisors looked back over the decades to what happens to a stock that has joined the 10 biggest in the S&P 500. In the decade before getting there it has, on average, outperformed a basket of all U.S. companies by an impressive 10% a year. In the next 10 years, though, it actually has lagged behind the market by 1.5% a year. (…)
The trailing price-to-earnings ratio of the S&P 500’s top 10 constituents in November was 68% above their average multiple over the past quarter-century, which includes the tech bubble years, according to J.P. Morgan Asset Management. The P/E ratio of the remaining companies was just 28% above average. (..)
Back in 1972 a group of “one-decision” stocks increasingly favored by fund managers—the so-called Nifty Fifty that included Walt Disney and Philip Morris—sported lofty multiples more than twice as high as the overall market at their peak. Most survived and even thrived, but their shares lagged behind the market for years as their valuations reverted to the mean in the ensuing bear market. (…)
Meanwhile:
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