Tim Hoyle, CFA, Chief Investment Officer
thoyle@haverfordquality.com

Consumers Brush Aside Need for Additional Stimulus

The S&P 500 declined by 1.6% on Monday, October 19 as markets came to realize that a pre-election Covid-relief bill was out of reach. It is obvious that the political calculus of both Senate Majority Leader McConnell and House Speaker Pelosi stands in the way of a compromise, which should be appalling to anyone who says they care about those who have been hardest hit by the economic lockdown. But the markets and consumers are lending no sense of urgency to the debate. The charts below show that consumers are spending more now than they did a year ago. Home improvements are replacing vacation spending and slashed dining-out budgets are making the way for Costco trips. The economic fall and resurrection of 2020 is stunning.

Home Builders Can’t Build Houses Fast Enough 

Graph - " NAHB/Wells Fargo National HMI - History (Seasonally Adjusted)".

Restaurants’ Loss is Costco’s Gain

Graph - "2020 Costco Same Store sales". Graphical Illustration of Sales between January 2020 and September 2020. In April, same store sales were significantly low within the negatives despite higher sales from other months.

Total Retail Sales are up 5x% 

Graph - "Retail Sales". Graphical Illustration of Retail Sales between 2011 and 2020. Despite the increasing trend line, sales have decreased in 2020 and have risen by the end of the year.

Consumer Confidence is Not as Strong as Retail Sales Indicate

Graph - "Consumer Confidence". Graphical Illustration of Consumer Confidence between 2011 and 2020. Confidence decreased in 2019 and slightly risen in 2020.

Last week ushered in a good start to the earnings season; forty-two out of the fifty S&P 500 constituents reporting results beat earnings expectations. The second week of the earnings season will bring a slew of new economic information for investors to digest.


Selected S&P 500 Companies Reporting this Week