Among the bets that may end up backfiring later this year is the recent bet by investors on US retail shares. Just this year the S&P Retail Index has outperformed the S&P500 by nearly 6%.
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| Source: Ycharts (click to enlarge) |
With the current improvements in the labor and housing markets, investors have piled into retail-focused companies. However, today's retail sales surprise to the downside (
see chart on Twitter) points to potential weakness in the retail sector. This was followed by another consumer-related surprise - the UMichigan Consumer Sentiment, which came in materially below expectations.
MarketWatch: - The University of Michigan-Thomson Reuters consumer-sentiment gauge dropped to a preliminary April reading of 72.3 -- the lowest result since July -- from a final March reading of 78.6, reports said Friday. Economists polled by MarketWatch had expected a preliminary April reading of 79.3. However, consumers have faced negative news on jobs and federal spending.
With the consumer being such a large part of the economy, these results point to potentially sluggish growth in the US. It is possible that the seasonal pattern (
discussed here) of US economic activity could be repeating itself.
Reuters: - The data supports the view that the U.S. economy continues to struggle and hasn't performed as well as analysts believed just a few weeks ago. Many analysts cut their growth forecasts for the first quarter.
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