Stock valuations are the discounted values of future earnings. Future earnings depend on future revenue, which may diminish whenever the future includes a recession. So, broad economic conditions are a big factor to watch in stock valuation.
Broad economic conditions depend ultimately on the consumer’s ability and willingness to spend money. And July’s retail sales report gave us a peek at that.
Why Consumer Spending Is Still Low Compared to Previous Recoveries
Core retail sales rose 0.6% from June. The uptick was more than analysts expected, and most categories were up, too. The exceptions were clothing and electronics sales.
The latter may have to do with potential smartphone buyers waiting to see new iPhone models expected to debut this fall.
Peter Boockvar summed up the bigger picture:
This post was published at Mauldin Economics on AUGUST 23, 2017.