ACTIONABLE ADVICE FOR FINANCIAL ADVISORS: Newsletters and Commentaries Focused on Investment Strategy

Follow us on

    Last 14 days

Most Popular Articles


Most Popular Commentaries

    Last 12 Months

Most Popular Articles


Most Popular Commentaries



More by the Same Author

Equities
   Growth
Fixed Income
   Treasuries
Global Markets
   Global
Investments
   Investments

January Retail Sales: Why Stocks May Be Vulnerable

February 13th, 2013

by Russ Koesterich

of iShares Blog

When the Commerce Department releases January retail sales numbers on Wednesday, economists expect to see a big drop from December, partly thanks to the impact of the new payroll tax hike heralded in by the New Year’s deal to avoid the fiscal cliff.

But if one index of weekly sales data is any indication, the headline retail sales number could be worse than expected. Take a look at this weekly index of retail sales, which is known as Redbook Weekly Retail sales data. It has shown a downward trend since the start of the year.

When the Commerce Department releases January retail sales numbers on Wednesday, economists expect to see a big drop from December, partly thanks to the impact of the new payroll tax hike heralded in by the New Year’s deal to avoid the fiscal cliff.

But if one index of weekly sales data is any indication, the headline retail sales number could be worse than expected. Take a look at this weekly index of retail sales, which is known as Redbook Weekly Retail sales data. It has shown a downward trend since the start of the year.

Based on this index, which is admittedly narrow, retail sales have been negative for five consecutive weeks. While the drop in sales has been modest, it has been consistent week after week. It leaves open the possibility that the new tax hike hitting consumers’ paychecks – remember it has impacted most workers and is expected to subtract roughly 1.5% from personal income this year – could send the headline retail sales number even lower than the consensus estimate of 0.1% growth from December.

If this trend is confirmed by Wednesday’s retail sales report, it would mean that consumers are certainly starting to feel pressure from the payroll tax hike.

As such, it would also mean that stocks may be vulnerable, while more perceived “safe haven” investments like Treasuries may be poised to benefit. On the other hand, if the data surprises to the upside, it would be a positive for risky assets, including stocks.

Source: Bloomberg

Russ Koesterich, CFA, is the iShares Global Chief Investment Strategist and a regular contributor to the iShares Blog. You can find more of his postshere.

© iShares Blog

isharesblog.com

Website by the Boston Web Company