The dot com boom and the real estate bubble gave consumers confidence and a way to spend like it would never end. The bubbles have burst and deleveraging is taking a toll on consumers. We can no longer sell our Qualcomm stock for $500/share or swipe our ATM card through our home as many did for the last 10 years. Where will consumer spending come from for the next ten years?
Approximately 30% of US household wealth was destroyed by the real estate collapse and the 2008 stock market crash. Currently it stands at about $15 trillion, down 30% from $22 trillion at the 2007 peak. With consumer household debt at approximately $13 trillion, this leaves us with $2 trillion in assets. The debt burden is taking a toll on the consumer as home values continue to fall and banks cut their credit limits. The consumer would rather save than spend as it deals with a lack of assets.
Markets have been pricing a recovery in consumer spending which accounts for 70% of GDP but, retail sales last month disappointed. The commerce department reported today that retail sales fell 0.1 percent last month as economists had expected a gain of 0.7 percent. All eyes will be on the fall retail spending as back to school shopping accounts for much of retail sales. The SPDR S&P Retail (NYSEARCA:XRT) which comprises of approximately 60 stocks that follow the US retail market has enjoyed 50% gains since it’s November 2008 low.
Here is a list of the top 10 companies listed within the ETF below:
- CHICO’S F A S INC (NYSE:CHS)
- COLLECTIVE BRANDS (NYSE:PSS)
- Expedia, Inc. (NASDAQ:EXPE)
- GAP INC (NYSE:GPS)
- GUESS INC. (NYSE:GES)
- Gymboree Corporation (NASDAQ:GYMB)
- J CREW GROUP INC. (JCG)
- PENNEY J C CO HOLDIN (NYSE:JCP)
- LIMITED BRANDS INC (LTD)
- RADIOSHACK CORP (NYSE:RSH)
Investors may looking to book some profits after today’s retail numbers, and the UltraShort Consumer Services ProShares (NYSEARCA:SCC) & UltraShort Consumer Goods ProShares (NYSEARCA:SZK) bet against the consumer.
'Disclosure: No Positions'