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The final trading week of a year always brings a few of the same things: a reflection on the past year as a whole, peering ahead into what’s to come in the new year and a look at holiday retail sales performance. Here at the end of 2016, all three views look uncommonly positive.
Starting first with retail sales, even though we continue to see online retailers take market share from walk-in stores — Amazon (AMZN - Free Report) , for example, raked in more than $1 billion in sales over the holidays — we still saw 6.5% gains in brick & mortar stores for 2016 holiday shopping. Men’s apparel and furniture stores performed best.
This would play directly into gains for consumer confidence we see as well, which is at its highest level in 15 years, or pre-9/11! Retail sales themselves bear most of this out — they are currently at their highest levels in 11 years.
So what’s next? Can we expect this good feeling to continue into 2017, or will we see deep sell-offs in January like we have in the past two years? Well, for obvious reasons — mostly election-related — good times are expected to stick around. The promise of corporate tax reform, deregulation, repatriation of corporate funds into the U.S. and the possibility of debt-fueled infrastructure spending under a Trump administration with no obvious gridlock in Congress, show few pot-holes for the domestic economy in the new year.
Of course, we already see a chunk of this positivity priced into the market. The huge bid-up in the markets following the surprise election of Donald Trump has pushed equities past fair value, according to Zacks Chief Economist John Blank. Even with a positive market outlook, Blank still sees the possibility for a 7-8% pullback in stocks near-term to get back toward fair value (S&P 500 P/E at 16x).
But with more oil-producing countries agreeing to a cut-back in production to work down the global oil supply glut in accordance with last month’s OPEC resolution — Venezuela being the latest, agreeing to a 95K barrel cut — we expect oil prices to firm up, if not rise. In fact, February market futures for a barrel of oil are currently up in the mid-$50s, the highest they’ve been in awhile. This spells more good news for all industries that directly benefit from higher oil prices, which we saw when oil plummeted into the $20s meant a significant plurality of them.
So what does this mean for Dow 20K? Interestingly, this threshold has not been as hotly pursued as a market narrative after weeks of failing to break through. That said, the Dow is 55 points away from ringing this bell, and Dow futures are currently +39 ahead of today’s market open. The National Association of Retailers reports after the bell; could a big positive surprise here push today’s close to this new record high? Time to find out.
Want more good news? Check out Zacks Executive Vice President Steve Reitmeister’s last Profit from the Pros: Are Investors Confident?
Image: Bigstock
Have a Holly Jolly Outlook
Wednesday, December 28, 2016
The final trading week of a year always brings a few of the same things: a reflection on the past year as a whole, peering ahead into what’s to come in the new year and a look at holiday retail sales performance. Here at the end of 2016, all three views look uncommonly positive.
Starting first with retail sales, even though we continue to see online retailers take market share from walk-in stores — Amazon (AMZN - Free Report) , for example, raked in more than $1 billion in sales over the holidays — we still saw 6.5% gains in brick & mortar stores for 2016 holiday shopping. Men’s apparel and furniture stores performed best.
This would play directly into gains for consumer confidence we see as well, which is at its highest level in 15 years, or pre-9/11! Retail sales themselves bear most of this out — they are currently at their highest levels in 11 years.
So what’s next? Can we expect this good feeling to continue into 2017, or will we see deep sell-offs in January like we have in the past two years? Well, for obvious reasons — mostly election-related — good times are expected to stick around. The promise of corporate tax reform, deregulation, repatriation of corporate funds into the U.S. and the possibility of debt-fueled infrastructure spending under a Trump administration with no obvious gridlock in Congress, show few pot-holes for the domestic economy in the new year.
Of course, we already see a chunk of this positivity priced into the market. The huge bid-up in the markets following the surprise election of Donald Trump has pushed equities past fair value, according to Zacks Chief Economist John Blank. Even with a positive market outlook, Blank still sees the possibility for a 7-8% pullback in stocks near-term to get back toward fair value (S&P 500 P/E at 16x).
But with more oil-producing countries agreeing to a cut-back in production to work down the global oil supply glut in accordance with last month’s OPEC resolution — Venezuela being the latest, agreeing to a 95K barrel cut — we expect oil prices to firm up, if not rise. In fact, February market futures for a barrel of oil are currently up in the mid-$50s, the highest they’ve been in awhile. This spells more good news for all industries that directly benefit from higher oil prices, which we saw when oil plummeted into the $20s meant a significant plurality of them.
So what does this mean for Dow 20K? Interestingly, this threshold has not been as hotly pursued as a market narrative after weeks of failing to break through. That said, the Dow is 55 points away from ringing this bell, and Dow futures are currently +39 ahead of today’s market open. The National Association of Retailers reports after the bell; could a big positive surprise here push today’s close to this new record high? Time to find out.
Want more good news? Check out Zacks Executive Vice President Steve Reitmeister’s last Profit from the Pros: Are Investors Confident?
Mark Vickery
Senior Editor
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