I’ve been bullish for some time now. But this has me even more excited…
Several economic figures were released this month that have me feeling encouraged about the future.
Despite scary headlines, volatility, and the financial media fearmongering, the U.S. economy and stock market are strong. Sure, we may get some pullbacks every now and then… but that simply creates opportunity.
Today, I want to talk about what the economy is showing us right now – and one area of the stock market that I’m watching closely…
Consumers remain an important part of the economy. And the latest retail numbers prove that they’re still going strong…
Retail sales gained 3.8% in January – much better than expectations of 2.1%. It was also a big rebound from the 2.5% decline in December.
If we dive in deeper, we can see where folks are spending the most money…
First, it shouldn’t be a surprise that online shopping is growing faster than shopping in brick-and-mortar stores. What they call “non-store retail” saw a 14.5% increase in sales.
Auto-related retail sales have remained hot, too – consumers continue to buy even as prices are soaring for both new and used models. That’s likely why sales at car dealers rose by 5.7%.
The one area that didn’t see growth last month was food and drinking establishments. Sales in that sector fell 0.9%. With the spread of the Omicron variant, more people chose to stay home rather than go out for dinner and drinks. But I don’t expect that figure to stay depressed for long… We’ll likely see some interesting opportunities on the turnaround.
Now, back to online versus brick-and-mortar retail…
The Amplify Online Retail Fund (IBUY) – a benchmark for e-commerce stocks – has roughly doubled the performance of the brick-and-mortar-based SPDR S&P Retail Fund (XRT) since it was launched in 2016.
But over the past year, IBUY is down more than 48%. XRT is down too – only about 2%, though. Take a look…
That’s a 46-percentage-point difference in just 12 months.
This is a reminder that even the strongest trends can take big hits in the near term. But those hits create opportunity. If you were a buyer today, would you put your money in e-commerce stocks or old-school, brick-and-mortar retailers?
My guess is that nearly everyone would opt for e-commerce – and so would I.
That’s why it’s important not to harp too much on past performance. And you especially shouldn’t look at just one year of trading to give you the full picture. It’s like driving a car while looking through the rearview mirror…
It won’t end well.
Three of IBUY’s top four holdings are travel-related – Expedia (EXPE), Booking (BKNG), and Airbnb (ABNB). Just as restaurants will come back as the spread of COVID-19 slows and more people go out for dinner, travel companies will also rebound as the world gets back to normal and travel picks up again.
This underperformance won’t last. I suspect this group of stocks is ripe for a turnaround… And it’s only a matter of time before they are back to new highs.
Here’s to the future,
— Matt McCall
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Source: Daily Wealth