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Consumers support the economy. What should I do if they stop spending?



Major retail sales dropped sharply by 1.7% in December, at most two decades.

Guilty in December chaos. Or the beginning of the closure of the government. Or even "glitches" in the data, as Larry Kudlov, an economic adviser to the White House, made last week.

Regardless of the cause, the obvious drastic changes in spending were sent by economists who tried to mark their growth forecasts. Goldman Sachs reduced GDP in the fourth quarter to 1.9%. Bank of America reduced its forecast to 1.5%.

This is a vivid reminder of how it is not only similar to Amazon ( AMZN ) Macy's ( M ) and Best Buy ( BBY ) which depend on American buyers.

"The US consumer is holding the global economy on its shoulders," wrote Peter Bokvar, Chief Investment Officer at Bleakley Advisory Group, in a report late last week.

This may sound like an overstatement. But let's remind that consumer spending accounts for two thirds of the US economy, which is the largest in the world. China is facing a sharp slowdown, the annual growth of Germany at the same time as Brexit continues to burden the United Kingdom, while Italy is in a recession.

"We better hope it was a lunar release, and that stock recovery … will revive consumer spending," said Bokwar.

Maybe it's not surprising that Americans stopped spending money at the end of 201

8.

] Not only Washington was about to become the longest partial closure of the government in US history, but once the turbulent Nasdaq collapsed into the bear market. Concerns over the recession, which, from a quick glance, exaggerated, triggered the worst December of the S & P 500 since the Great Depression

The weakness of retail trade by As the fear of a downturn may become a self-fulfilling prophecy, there is a positive feedback loop between consumers and the market High stock prices encourage buyers to spend – and vice versa

The American economist at the Bank America, Michelle Meyer, said that the sharp deterioration in consumer confidence was the largest "negative shock of confidence" since 2011

in 2019 on a sloping basis, – Meyer wrote to clients late last week.

Jan Hatsius, Chief Economist at Goldman Sachs, warned that the decline in retail sales increases the risk that the growth rate of consumer spending has dropped significantly.

But Hatzius believes that the retail deficit in December may turn out to be unreliable, since the economic reports in January indicate a rebound.

Fortunately, the drama of the government's shutdown has ended, and the stock market has come off.

Boosted by the suddenly enduring Federal Reserves and US-China trade talks, S & P 500 has demonstrated its best 30-day start to the trading year since 1991, according to the Bespoke Investment Group. Nasdaq climbed 12% by 2019. And Dow is only 4% lower than the record high of October 3.

In other words, the shock of trust should be worn, paves the way for a renewal of consumer spending.

But beware of the next market storm. If it lasts a long time, it may be sufficient to curtail the economy.

2. Buffet clock: Berkshire Hathaway ( BRKA ) is expected to report the earnings of the next day. If history is a landmark, Warren Buffett will release his annual shareholder list the next day.

Buffett's letter is carefully read for his investment advice. This year's memorandum will be designed to understand the slowdown in economic growth in the United States and around the world, as well as what it means for companies and markets.

A small piece of luster that can also be explained: last week, Berkshire showed that she sold all her $ 2 billion share in Oracle ( ORCL ) after the conduct investment for only one quarter
3. More food earnings from the menu: This is another stacked week for food earnings. Domino ( DPZ ) Jack in the box ( JACK ) Wendy's ( WEN ) and Dine Brands ( DIN ) is the owner of IHOP and Applebee, all on deck. Food and fast casual restaurants discussed how digital investments, delivery programs and menu innovations were played in 2018. Expect these companies to do the same when they report the results.

For Domino, digital and delivery have been a force and a way to try to maintain an edge over competitors like Pizza Hut. A few weeks ago, Domino announced a limited time initiative that uses artificial intelligence to reward people when they buy pizza – even if it's from a competitor. Investors may want to know how digital efforts, similar to those paid last year. This week:

Monday – US markets closed for Presidents' Day

Tuesday – Walmart ( WMT ) ] reports on profits
Wednesday – CVS ( CVS ) Jack in a box and Cheesecake Factory ( CAKE report profits
Thursday – Deutsche Telekom ( DTEGY ) Barclays ( BCS ) ] Baidu ( Profits BIDU ) report by Domino & Wendy
P & # 39; s – Berkshire Hathaway ( BRKA ) Revenues

CNN Bu siness Daniel Wiener-Bronner contributed to this report.


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