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Classic Retailer Top Around Christmas, Duh!

Jan. 19, 2011 12:00 PM ETTIF, TPR
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 As the optimism over retail sales soaring hit its high in late 2010, so did almost all of the retail stocks. Tiffany & Co. (NYSE:TIF), Coach, Inc. (NYSE:COH), AnnTaylor Stores Corp. (NYSE:ANN) and Macy's, Inc. (NYSE:M) all put in their tops December, 2010. This was classic as the economy and hype reached levels not seen in years over consumer, retail spending. Since December, just before Christmas, these stocks have all fallen sharply back down.

While the run up was mainly due to the hype created by a weak Dollar and a very strong stock market making people feel richer, it also makes sense that during the height of the Christmas shopping season, these stocks would make their highs. It also makes perfect sense how after the big shopping season concluded, these stocks would see sellers and profit takers.

The future of consumer spending is very cloudy.  The markets ran higher as the Federal Reserve has inflated all asset prices including the stock market.  The dramatic rise in the stock market pushed people into stores as the fake wealth effect took hold. While this has kept people buying, the question must be asked, how much higher can the markets go?  Last year alone, from the lows in July, the markets were up close to 25%. Can the Federal Reserve inflate the stock market another 25% in 2011? If so, how low will the Dollar have to go?  These are all important questions that must be asked and will be answered in 2011.

Gareth Soloway

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