Stocks have been soaring in recent months. But keep in mind that not everyone invests in the markets... Most average folks probably go about their daily lives without thinking about stocks.
Consumer Economic Fear Is Surging Again
By Ethan Goldman, junior analyst, Chaikin Analytics
Stocks have been soaring in recent months. But keep in mind that not everyone invests in the markets...
Most average folks probably go about their daily lives without thinking about stocks.
That might seem obvious to you. But what might not be as immediately obvious is the role that these folks may play in your investments.
Think about what could make a stock attractive...
Personally, I like to see positive analyst opinions about a stock. If the analysts on Wall Street are optimistic and raising their price targets for the stock, that's a good sign.
I'm also interested in the Chaikin Money Flow rating in the Power Gauge. That shows me what the so-called "smart money" thinks about that stock. If the largest institutions and individuals on Wall Street are loading up on shares, that's a great indicator of upside ahead.
And of course, I also want to see what's happening with earnings...
It's hard for a company to be successful if it doesn't generate revenue. For many companies, that revenue comes mostly from end consumers.
And these are the same consumers who aren't feeling too optimistic about the future of our economy right now...
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Consumers Are More Fearful Today Than They Were in 2008
The University of Michigan publishes data on consumer sentiment. It surveys a random sample of folks across the U.S., and it builds this data into an index. This index dates back to 1952.
And what University of Michigan researchers found in the most recent release is concerning...
Consumer sentiment is currently lower than it was in November 2008.
This was the month after the Dow Jones Industrial Average and S&P 500 Index each fell about 20% in a single week.
As you can see, it's rare for consumer sentiment to fall this low...
You'll notice that sentiment also cratered earlier this year before rebounding... and then turned lower again.
Put simply, folks are feeling on edge about the economy right now.
And if people get too nervous about where the economy is heading, they'll start pulling back on spending money. That's particularly true for lower-income folks.
And as I'm sure you've noticed, gold has been hitting new all-time highs this year. It's a "safe haven" asset. So when economic fear grows, investors tend to pile into gold.
But it's worth paying attention to consumer sentiment. That affects regular folks' spending... which in turn can hit certain companies' bottom lines.
And as you might expect, the Power Gauge is picking up on this trend...
Our System Sees Weakness in Three Consumer-Facing Industries
Let's look at three industries through the lens of the Power Gauge.
We'll start with Consumer Staples Distribution and Retail. The Power Gauge rates 39 stocks in this industry. And right now, only four get a "bullish" or better rating.
This industry consists of retail giants like Walmart (WMT). Today, Walmart is in "neutral" territory in the Power Gauge.
Moving on, the Power Gauge rates 119 stocks in the Specialty Retail industry. And only 11 of those stocks receive "bullish" or better grades right now.
One of those "bullish" stocks is Five Below (FIVE). As its name implies, the company prices most of its products at $5 or less.
Finally, we'll look at the Hotels, Restaurants, and Leisure industry. It includes 120 stocks with Power Gauge ratings.
Right now, only six of those stocks get a "bullish" or better grade.
Folks, my point here is clear...
Consumer spending obviously hasn't collapsed. But many folks are feeling pain in their wallets. Worry and fear over the economy are near historic heights.
If people increasingly dial back on spending, watch out for weaker earnings for many of the companies in those industries I discussed.
Good investing,
Ethan Goldman
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+1.13%
7
16
7
S&P 500
+1.04%
117
264
122
Nasdaq
+1.26%
32
48
20
Small Caps
+1.95%
479
1071
366
Bonds
+0.38%
Materials
+1.19%
4
9
13
— According to the Chaikin Power Bar, Small Cap stocks have become somewhat more Bullish than Large Cap stocks. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Real Estate
+3.84%
Consumer Staples
+2.34%
Communication
+2.11%
Health Care
+2.0%
Industrials
+1.36%
Information Technology
+1.06%
Consumer Discretionary
+1.03%
Materials
+0.79%
Utilities
+0.72%
Energy
+0.59%
Financial
+0.25%
* * * *
Industry Focus
Regional Banking Services
15
117
14
Over the past 6 months, the Regional Banking subsector (KRE) has underperformed the S&P 500 by -11.32%. However, its Power Bar ratio, which measures future potential, is Strong, with more Bullish than Bearish stocks. It is currently ranked #12 of 21 subsectors.
Top Stocks
ABCB
Ameris Bancorp
TCBX
Third Coast Bancshar
BANC
Banc of California,
* * * *
Top Movers
Gainers
EXE
+6.07%
SMCI
+5.48%
TTD
+5.02%
MRNA
+4.73%
J
+4.62%
Losers
APP
-5.57%
STX
-4.88%
ORCL
-4.85%
CEG
-4.27%
WDC
-3.7%
* * * *
Earnings Report
Earnings Surprises
STLD Steel Dynamics, Inc.
Q3
$2.74
Beat by $0.11
WRB W. R. Berkley Corporation
Q3
$1.10
Met estimate
SMMT Summit Therapeutics Inc.
Q3
$-0.31
Missed by $-0.25
* * * *
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This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.
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