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Investors may need to get out their hard hats as they prepare for the holiday season and early part of 2024 as macroeconomic worries grow in the U.S.
Underlining that sentiment, the Conference Board reported on Tuesday that consumer confidence fell again in September to mark two consecutive months of declines. Conference Board Chief Economist Dana Peterson said September’s disappointing headline number reflected another decline in the Expectations Index, as the Present Situation Index was little changed.
“Write-in responses showed that consumers continued to be preoccupied with rising prices in general, and for groceries and gasoline in particular. Consumers also expressed concerns about the political situation and higher interest rates. The decline in consumer confidence was evident across all age groups, and notably among consumers with household incomes of $50,000 or more.”
Peterson also noted the consumer assessments of the present situation were little changed overall, due to divergent views on the state of business conditions and job availability. Fewer consumers said that business conditions were good, but fewer also said they were bad. Regarding the employment situation, slightly more consumers said that jobs were plentiful, but also slightly more said that jobs were hard to get. In terms of the current family financial conditions, the share of respondents citing a good situation fell again, and those citing bad conditions rose. Meanwhile, expectations for the next six months tumbled back below the recession threshold of 80, reflecting less confidence about future business conditions, job availability, and incomes. Notably, average 12-month inflation expectations have held steady over the past three months despite the ongoing complaints about higher prices online and at stores.
Some of the notable consumer discretionary stocks that have fallen hard over the last six weeks include Torrid Holdings (CURV) -44%, Rent the Runway (RENT) -41%, Farfetch (FTCH) -35%, Overstock.com (OSTK) -33%, Dollar General (DG) -32%, Chewy (CHWY) -31%, Oatly (OTLY) -28%, Planet Fitness (PLNT) -26%, Big Lots (BIG) 24%, Sportsman’s Warehouse (SPWH) -23%, BJ’s Restaurants (BJRI) -23%, Dutch Bros (BROS) -22%, Savers Value Village (SVV) -21%, Duluth Holdings (DLTH) -20%, Peloton Interactive (PTON) -20%, CAVA Group (CAVA) -20%. Of course, the question for investors is if all the downside is priced in?
Target (TGT) has performed better than those retail stocks with a drop of just 10%, while Walmart (WMT) has gained 3.1% and Costco (COST) added 3.4% as investors turned more defensive with their positioning. By comparison, the SPDR S&P Retail ETF (NYSEARCA:XRT) is down 5.5% over the last six weeks, while the S&P 500 Index is off 3.5%.
