The No. 1 Thing to Watch in a Consumer-Driven Week

Shah Gilani|November 13, 2023

It’s a big numbers week on Wall Street… with CPI numbers, big-box retail earnings and retail sales figures all coming in over the next few days.

These numbers are all about the consumer… and while consumer spending is crucial heading into the final weeks of the year…

That’s not my No. 1 takeaway for the week.

Watch my Monday Takeaways video to see what to watch this week… and how you should position your portfolio to take advantage.

Click on the image below to watch it.

Transcript

Hi, everybody, Shah Gilani here with your Monday takeaways.

First, we’re gonna take a look at last week because if you don’t know where you’re coming from, it’s hard to tell where you’re likely going to go. And what happened last week, we had a heck of a rally, especially Friday.

I would say it was a surprise to most people considering the fact that we had some negative views considering the fact that Moody said they had the US on negative outlook watch In other words, they were likely to downgrade the US. But happened, bonds kinda held tight and rallied a tiny bit, but the stock market went crazy. So Takeaway there is the market wants to go up. Alright?

Seasonality is one reason. Lots of money on the sidelines and another reason, but the prevailing reason is right now, going into year end, if the Fed is done hiking, if and I’m gonna get to recession talk, there is increasing recession call, and the Fed is done, done, done, which everyone is saying they’re done, done, done, even though Jerome Powell is saying, not so much. And we had a couple other Fed presidents last week say, not so much. We just may be back.

Doesn’t matter. The market doesn’t believe it. And that means if the Fed is done hiking and it’s a question of when do you go in to buy bonds with all the money on the sidelines we’re starting to see money come off and go into fixed income, going into even longer duration.

That’s in spite of a terrible 30-year auction last week. So I come back to the bond market at the end of this, but the takeaway from last week is when it comes to stocks people, markets look like they wanna go up. Can they go up? They have the energy to go up.

We’ve broken through, the downtrending channel. We were in the S&P. We got about 4,400. That’s looks positive and we can stay above there and move forward.

We can certainly see a year end rally.

Are we gonna fall back? Well, maybe that’s a matter of earnings and CPI and some other stuff coming up this week, which I’ll get to. But the takeaway from last week is trend is your friend. If you break out of a downtrend, and you look like you want to go higher, and you got things like seasonality in your favor.

You got money on the sidelines that can come in in your favor. You got the Fed being done, we’ll call it with raising rates. That’s a positive. There’s a lot of positives.

There’s a lot of ammunition, a lot of dry power out there, and there’s a lot of investors completely missed 2023’s rally, missed the Magnificent 7, missed everything about it, and we’re still up, you know, 15% in the S&P. For the year. So pretty powerful performance considering everyone’s scratching their head and trying to figure where to go. So last week, said to me the takeaway was looks like markets want to go higher.

So that’s from last week. This week, we got a busy week.

Lot of stuff going on. I’m gonna start with Tuesday, really, because Tuesday, we’ve got CPI numbers. Okay? Tuesday, we’ve got the Bureau member statistics bringing out CPI for October. Now economists are expecting a 3.3% year over year CPI number.

How are we good? Because in September, the real number was 3.7%. So we see If we see CPI come in around consensus estimates of 3.3%, that’ll be below September. That’s a good sign. So I think investors will take some heat there if it’s higher, but if it’s there or lower, again, another reason to see some buyers coming off the sidelines.

The core CPI is is expected to rise at 4.1%. Now that’s the consensus estimate for October. 4.1% was the core CPI number for September. So if that doesn’t change, maybe that’s okay.

I’m not so sure. If it’s higher, that’s not good. But if it’s lower than 4.1%, if we get a three handle on core, Another reason to rally. You takeaways there, watch CPI, see what it does.

If we are better than consensus, if the market positively, then make sure you got some of your positions set up to go long and try and go, why they maybe ended the year at Santa Claus rally that we look like we’re getting.

Next up Tuesday, we we got earnings coming up. We got Home Depot coming up. Why is Home Depot important? We got a lot of retail earnings coming out this week, big box stores, important stuff. So we got Home Depot on Tuesday.

Wednesday. We got Target and, TJX and Thursday, Walmart and Ross stores. Now, On the heels of CPI, seeing these big box retailers come in, it’s gonna be very telling how the market reacts to those stocks earnings and how the market reacts in general to their earnings. Because not only are we wanting to change the stocks and their earnings, and if they be forecast gonna be watching.

You have to be watching people for the market’s reaction. And the the reaction will likely be on any forward guidance, especially going into the fourth quarter. What did they see? Do they see consumers still strong in spending?

Do they consumers see consumers backing off? They see the mix of goods, that they’re selling change because consumer consumers are maybe tightening their wallets and their credit cards are getting woefully overburdened.

So we’ll see that. We’ll see that in the number. We’ll see that in the sales. We’ll see it in the projections. So earnings this week, as far as the big box stores, super important people.

We also have retail sales on Wednesday. So Wednesday is gonna be chockfull. Again, Tuesday is oh, people. Wednesday, we got Target and TGP and retail sales.

So this is from a, consensus. This is a consensus number. People this is from a survey. So the estimate for retail sales for October is -0.4% month over month.

That’s from September’s 0.7%. That’ll be a big turnaround in terms of looking at sales backwards. I’m gonna hold him accountable.

Thank you just fell off a cliff. Okay. So if they are worse than -0.4%, -0.6%, -0.7%. Oh my goodness.

People are gonna panic and say the consumers tapped out.

Ex autos because auto prices are coming down. Yes. But they’re still elevated. Ex autos retail sales are expected to be consensus is -0.2%. So not as bad as the headline number, but x autos -0.2%.

September, it was 0.6%. So from 0.6% to -0.2%, not looking good. Gotta keep an eye on those. The takeaway there is watch consumer spending, watch what consumers are doing in terms of that report, how the market reacts to it, And then at that point, you’re gonna have Home Depot, you’re gonna have Targets, and you’re gonna have PBX.

Again, what Thursday, You got Walmart, which is maybe gonna be the most important of the big box retailers, and what they say about forward guidance, what they say about the consumer, what they say about trends and spending. Really important week as far as retail sales as far as CPI, which just tells us a lot about inflation. And, of course, retail sales and these big box, stores, earnings. Take away there, people, is it’s all gonna be about spending in retail this week and how much that could Sumers have left to spend in.

Are they gonna continue to spend? Are things already starting to turn before we go into the big holiday spending season? So Take away there. Watch those numbers.

Watch them close if the market reacts positively. Make sure you have some long positions going into year end because we’ll have good, probably, follow-up from last week if those numbers are good in terms of the way consumers are spending or not spending and how the market reacts. Important week for that. We got potential shutdown.

We, again, at the end of this week. So there’s a stop gap measure in place in Congress we’ll see what happens here. It’s likely to get to go forward, and we probably won’t have the shutdown, but it’s out there. So it’s gonna be a nervous week.

The other thing that’s out there people is last week.

As far as the United States credit rating, movies came out and put the US on negative outlook. Meaning, they’re likely at some point to knock the AAA credit rating of the U.S. down. Now, S&P did in 2011.

Fitch did it last summer. So it’s not surprising, but it’s just a bit of a wakeup call. And what they said about it is even more of a wakeup call, which I’m gonna write about because it was pretty devastating and the implications are manifest. So to take away there, keep an eye on talk for from Congress, keep an eye on ratings, keep an eye on bond because we are watching bonds, Last week, it was all about stocks.

This week, once again, it’s gonna be about stocks. But bonds are now for months bonds where it would be telling everybody what the stock market was gonna do. Now it’s like the stock market. It’s like, nah, nah, nah, we don’t we’re not running our own game now.

And we’re gonna do what we’re gonna do. And now the bonds are taking a bit of a secondary place to stock. So the trend in stocks is likely gonna help bonds one way or the So keep an eye on the bond market because can’t not ever keep an eye on the bond market right now and then probably for the next year or two. So problems there, yeah, if the yields back up.

Does it look like they’re gonna back up? There’s probably no reason despite the fact that the auction last year the thirty year auction last week, I should say, not me here last week was horrible.

Horrible. All you need to know there is it was horrible.

And the market didn’t seem to care.

That’s because people are thinking, maybe there’s a recession. On the recession front, increasing talk about recession. You know, we were supposed to have recession this year in the summer. We were supposed to have recession starting in the second quarter through the third quarter.

There’s no recession. Now that it’s been moving forward now. People are talking about recession that’s coming. It’s gonna come in the first second quarter.

Goldman Sachs, Morgan Stanley, a little bit at odds in terms of their recession calls, Goldman Sachs is saying, yeah, we’re gonna see the Fed cut at the second half of 2024. Morgan Stanley’s going, no. We’re gonna see them cut maybe in the second quarter. Things are gonna they they think things are gonna turn that sour that quickly that the Fed’s gonna have to cut a whole bunch of times in 2024.

So a little conflicting there. Two big banks, one’s, like, nothing’s gonna get bad quickly. And the other’s things are probably gonna slow down, and the Fed’s probably gonna have to cut. But then we’re gonna see later in the year.

That’s conflicting. And that’s the problem for everybody. If we fall into a recession, what do investors do? Because typically, earnings fall 30% in a recession.

Thirty percent.

Guess what? If you read anything, now what you’re reading is, oh, the earnings recession is over because the third quarter, this quarter where companies are still reporting, I’ve seen earnings gains.

Is the first time in four quarters. They’ve seen earnings gains. So that people, recession. The earnings recession is over, but they’re knocking down fourth quarter estimates for earnings.

They’re knocking them down. So very confusing. The takeaway there is keep an eye on what the earnings are. Keep an eye on forward guidance It’s not time to make hard fast commitments.

If you want to play into a year end rally, yes, play into a year end rally. If you’ve got to make commitments, don’t make them hard fast. You stops. Make sure you get out of things back up.

Make sure if you go into some nice good long positions that you do well in. Let’s say you through the end of the year, get nice pop rally, then guess what? Stay with it, but don’t be so sanguine that you think the first quarter is gonna continue because it could get rocky. Certainly could get rocky in a second.

So you just gotta be light on your feet out there, people.

Last but not least, my big takeaway for this week is This is an important numbers with people. So takeaway is you gotta pay attention to the numbers that are coming out. CPI spending earnings and you gotta see how the market is going to react. The trend is your friend. If equities rally, even on bad news, especially on bad news, then the takeaway there is market wants to go higher.

Can things turn around on a dime? Of course, they can. But right now, trend seems to be higher. Market wants to go higher.

That’s your number one takeaway. Watch the numbers. See what the reaction is. Go with the trend.

I’ll catch you guys next Monday. Cheers.