This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
One week into 2024, and investors are being hit with several truths.
The first truth is that Magnificent Seven stocks don’t go up every single day (despite what December’s action showed…), and the downgrade buzzards on Wall Street lurk.
Apple (AAPL) shares are being hammered by analyst downgrades. Tesla (TSLA) is under pressure after meh delivery numbers. Nvidia’s (NVDA) stock is treading water following a ginormous year of gains.
Another truth is this is a market that will remain super sensitive to anything that dents the view that a barrage of interest rate cuts are coming this year. So bulls, root for subpar macroeconomic data if you must.
And the last truth is that the US consumer hasn’t fallen apart, and is unlikely to do so in the first half of 2024. I mean, how else can one interpret the eye-popping December jobs report from Friday?
The labor market added 216,000 jobs in December, up from 173,000 in November. Economists had expected 175,000 for the month.
The US economy created 2.7 million new jobs in 2023. Unemployment is plumbing record lows. Wages are still rising.
“The economic backdrop is solid and provides a strong cushion for continued consumer spending,” LPL chief global strategist Quincy Krosby told Yahoo Finance Live.
How do you play this shocking resilience from an investing standpoint?
Experts are signaling to stick with the consumer winners of last year.
Looked at another way, pay up to own stocks of companies gaining clear market share or benefiting from economic and societal tailwinds.
One of my favorite retail analysts, Matt Boss over at JP Morgan, just lifted his same-store sales estimates on Lululemon (LULU), a name he has been bullish on. The company continues to dominate the athleisure space with extra high-quality offerings that are commanding ever premium prices.
Boss also upped his profit estimates on Abercrombie & Fitch (ANF). I can’t say I am surprised — the company had a massive third quarter of sales, and probably did so again during the holidays. The brand is once again the go-to destination for sub-30 year olds.
More on why in my chat with Abercrombie & Fitch CEO Fran Horowitz in the above episode of Yahoo Finance’s Lead This Way.
Elsewhere, analysts that cover Costco (COST) such as Jefferies’s Corey Tarlowe struck very bullish tones upon receiving Costco’s December sales results late last week. Costco posted a December same-store sales increase of 8.1%, with growth in all product categories.
“We see prospects for Costco to deliver comparable sales 1-2 percentage points above historical levels based on: 1) channel shift from traditional grocery, department stores, and specialty retail; 2) higher growth among Gen Y/Z demos with stronger skew toward club offerings; and 3) bigger baskets as customers increasingly shop categories beyond food,” Tarlowe wrote.
I suspect good news from many retailers — reflecting consumer resilience — will be on display this week at the ICR conference in Florida. Yahoo Finance’s Brooke DiPalma will be there all week reporting, so give her a follow on X.
That said, not everything is perfect in consumer land — something acknowledged in Boss’s research.
“Digging deeper by demographic — excluding the $80 billion incremental COLA benefit (which impacts individuals aged 62 or over), our wallet analysis points to a $16 billion headwind on consumer spending for individuals under the age of 62 comprised of a $45 billion headwind from student loan repayment, $21 billion headwind from reduction in SNAP benefits, and $2 billion drag from tax refunds partially offset by a $51 billion tailwind from lower gas prices,” Boss notes.
But overall, the consumer has wind at its back. It’s worth doing a little bit of shopping for your portfolio in the new year.
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email [email protected].
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Jessica Roberts is a seasoned business writer who deciphers the intricacies of the corporate world. With a focus on finance and entrepreneurship, she provides readers with valuable insights into market trends, startup innovations, and economic developments.
