FREE WHELAN: Thanks America, for giving us all the US Consumer

In this Stockhead series, investment manager James Whelan, managing director Barclay Pearce Capital Asset Management offers his insights on the key investment themes and trends in domestic and global markets. From macro musings to the metaverse and everything in between, Whelan offers his distilled thoughts on the hot topic of the day, week, month or year, from the point of view of a professional money manager.

Good morning,

And so, bleary-eyed yet stoic, the nation lurches along the final stretch of the year safe in the knowledge that we really do have the best cricket team in the world.*

(*Ed: What was the Airport Economist’s forecast for The World Cup?)

In far more urgent news…

I have started the countdown for my annual Whelan Vs Thanksgiving Lunch on Sunday.

Sadly, however, I’ve now become that desperate foodie/fundie far too busy to try a new recipe.

So, I’m going to go ahead and repeat last year’s apricot jam glaze… but I have a lot to be thankful for and that’s what really matters.

Also – I envisage – a few Coors in the sunshine with the college football blaring on the big screen. The ideal way to pay respects to the largest economy on Earth.

Speaking of Thanksgiving…

And when it come to the largest economy on Earth we have full focus on the US consumer, that most precious yet powerful beast.

Retail earnings has been… choppy. Retail sales were down 0.1% last month, although that was less than the 0.3% expected, it’s still a fall.

We saw Home Depot (HD) report earnings – and wasn’t it amazing re: what Americans aren’t spending money on?

This is all touched on in the latest episode of the Theory of Thing Podcast,

The most important question for ~60% of US GDP (and therefore 15% of global GDP) is “how long does the US consumer keep going?”

From the same FT article…

“Now, though, with the labour market cooling more notably, wage growth moderating, and savings stockpiled since the pandemic beginning to run out, the question dogging officials is how long can the US consumer retain this resilience?”

Some notes from the US banks on the Ultimate Consumer…

Goldman Sachs’ Scott Feiler, consumer sector specialist.

Notes that retail sales did fall in October.

They see a slowdown but not a disaster. The consumer is “stretched” but somewhat resilient.

Big ticket items (autos and home related goods) are getting hit.

Services is below Covid but catching up and catching up strong.

RV’s and “power sports” (jetskis I guess) will remain challenged.

Small ticket stuff will remain okay, apparel etc.

Black Friday

Black Friday is Friday after Thanksgiving. Event based shopping is still strong. Shoulders around those events are not.

Small ticket electronics.

XRT has its best month in November.

How does it translate to earnings? Topline is missing by a few per cent but bottom line is still resilient through margin defence.

Helen Zentner- Morgan Stanley chief US economist

Cooling spending (obviously)

Business investment & equipment will return in back half of 2024

Existing home sales rise as cuts hit in back half 2024

Core goods in the CPI will be negative next month

Fed is done.

“Fed is done..noted”

Ok, back to Jimmy James…

What can we pull from all this?

Firstly, that the US consumer is still doing what it does, just smaller. Walmart also said that transactions over $1000 were down 5.2% year on year.

It’s all in line with the soft landing thesis now seen as the norm.

Companies are surviving it all fine because although spending is less, companies have been able to keep their margins throughout via lowered input costs and freed up supply chains.

Also note that Boomers are carrying the ball with increased spending while “the young’ns” have cut back. Similar to Oz.

Bottom line..bullish.

So how about that XRT ETF in the States? It’s mostly apparel and does well in November.

It too looks bullish…

Happy to participate. Stay long.

All the best and well done to the Aussies!

James

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