Hello TheoTrader,
Stocks staged an incredible rebound over the last week after our setup for a low played out accordingly. The importance of this rally cannot be understated, as it staved off what could have been a devastating close on the monthly time interval.
I’m also pleased with the new leadership I saw last week, as it signaled that bulls are still in business.
Speaking of business, did you see that Black Friday sales set a new record again? What’s even crazier is the fact that markets seemed to be two steps ahead of this new record.
The Consumer’s Real Deal
While the tech sector rebounded nicely last week and solidified its place as the leader year-to-date and over the past 12-months, the bigger story came from the consumer discretionary sector.
You read that right - traders poured money into the sector that covers retail spending the most as we head into holiday shopping season - next thing we know, a new Black Friday record was set.
So, where does this actually leave the consumer and the U.S. economy? We know that spending accounts for around 70% of U.S. GDP. But what’s the real state of the consumer?
A deep dive into the Black Friday numbers reveals something very clear - the wealthy are spending like there’s no tomorrow - and it’s providing the illusion that “everything is awesome.”
High-income households, or those making above $250,000 per year, are accounting for roughly half of the spending in the United States today. The reality for the rest of the population is much different, but we cannot rule out the possibility that this type of spending keeps the economy afloat even longer.
When it comes to the type of spending that the rest of the public will engage in, look no further than the article I published over the weekend. It’s a tale of two consumers now, and we must prepare and adapt accordingly.
Talk soon,
-Gianni