Amid all the euphoria about Trump’s big spending plans comes a reality check from the U.S. consumer. In this article , you’ll see that in-store retail sales for the Friday and Saturday following Thanksgiving fell 3.5% compared to the prior year. It is true that more sales are happening online and that bargains are available beyond the traditional “Black Friday” shopping spree, so sales are more spread out than they used to be.
But this material year-over-year decline is still sobering news, coming as it does in the midst of a historic stock market rally. With the Fed poised to tighten monetary conditions with a December rate hike, and the likely promise of more rate hikes to come, it’s not clear that euphoria alone will sustain the stock rally. Investors need to be careful as reality slowly intrudes on the rosy scenarios the market is painting (see prior article).
Stocks look overbought and bonds look oversold at these levels. Cash is a good asset to hold while we’re waiting for more visibility on these post-election trends.
– Jim Rickards, Chief Global Strategist, Meraglim