Christie E. from
Sedona, AZ asks: Hello Mitch, I work in retail and we’ve seen some swings
in spending over the past few months. Sometimes great, sometimes not. Curious
if you have some thoughts as to when spending may go up and stay up?
Mitch’s Response:
Thanks for writing, Christie. Recent data in the retail
spending category bears out what you’re seeing at your store. According to the
Commerce Department report released last week, retail sales jumped 7.6%
month-over-month in January, only to fall 3% from January to February.
There seem to be some pretty good explanations for the
topsy-turvy nature of the data. In December, cases were surging, and many
American households were awaiting stimulus payments that began to arrive
towards the end of the month. January saw many of those payments make their way
into consumer purchases, hence the boost.1
It follows that February data was weak, as the one-time
impact of the stimulus payments wore off and the holiday spending push also
faded. Winter storms also play a role just about every year in softening
spending figures, and 2021 was no exception, especially considering the crisis
in Texas.
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The retail industry like
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We now know that the passage of President Biden’s $1.9
trillion will include even more direct payments to American families, including
$1,400 checks to a majority of households and a substantial boost to the child
tax credit which was also extended to families making no income. This
‘helicopter money’ is bound to make its way into the real economy, in my view,
and I would suspect we see a boost to spending in March and April as a result.
Indeed, early credit card data from Bank of America ad JP
Morgan already shows spending rebounding from February to March, so we can
safely assume that March will post fairly solid numbers in the retail spending
category. As for your question regarding when spending may remain sustainably
strong, I think there is somewhat of a perfect storm arriving that could boost
spending for many months to come.
First, stimulus payments are arriving essentially any day
now. Second, you have vaccination rates rising at a strong clip, with at least
half of American adults on schedule to receive one vaccine dose by the end of
April and two-thirds of people set to receive one by Memorial Day. And finally,
we have warmer weather on the way, which will inspire people to get outside
more and could lead to a concurrent increase in foot traffic to retail stores,
restaurants, and so forth. I’m looking ahead to a strong economic spring and
summer, and think the retail sector will be a major beneficiary.
The key to managing the highs and lows of the market is
finding an investment strategy that meets your goals. Investors will see a huge
difference when they are prepared for what’s to come instead of making sudden
financial decisions. To help you learn more about strategies that cater to
different investment objectives, we have created our Dean’s List of Investment
Strategies.3
Our Dean’s List describes five of our investment strategies
that are ranked in the top of their respective classes, according to
Morningstar (as of 12/31/20).4 If you have $500,000 or more to
invest and want to learn more about these strategies, click on the link below
to see how they could potentially benefit you.
Disclosure
1 Wall Street Journal. March 16, 2021. https://www.wsj.com/articles/spending-is-about-to-spring-forward-11615905956?mod=markets_lead_pos10
2 ZIM may amend or rescind the “Dean’s List of Investment Strategies” guide for any reason and at ZIM’s discretion.
3 ZIM may amend or rescind the “Dean’s List of Investment Strategies” guide for any reason and at ZIM’s discretion.
4 These rankings may not be representative of any one client’s experience. In addition, they are not indicative of future performance.
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