Over my 30+ years in the stock market, the general rule about the year-end holidays has been that the longer the time between Thanksgiving and Christmas, the more spending Americans will do. That should have meant a banner season for retail this year, because Thanksgiving fell on the earliest possible day in 2012.
First reports on credit card usage, however, indicate the opposite–that overall retail spending barely exceeded the 2011 level, despite predictions of a 3%+ increase. Explanations include: Hurricane Sandy (some offices around Wall Street still don’t have phone service, the transit system isn’t yet fully up and running), the fiscal cliff, the Newtown shootings. Who knows the real reason? …I tend to think that this may be the opening act of a long-lasting readjustment of consumer spending, in response to what will hopefully be a Washington that begins to live within its means.
From an investment point of view, however, noting the possible overall weaker spending trend is less important than breaking down overall spending into areas of strength and weakness. We won’t have the data needed to do this for several weeks. But there will doubtless be both makers of innovative products and demographic segments that will be doing considerably better than the nation as a whole. Technology and middle-/lower middle-class spenders are where I’m going to be looking first.