Why is the Stock Market Up?
While the various stock exchanges have dropped a bit over the past few days, they are up considerably since the first of the year. People frequently ask, “Why is the stock market up?” The answer is generally something related to “Because people keep spending money!” What has been challenging with the economy over the past twelve months is that where they are spending money has shifted dramatically.
The chart below shows that retail spending increased at a 5.8% rate from February 2020 through January 2021.
Yet there were several sectors that took hits, even after creatively changing the nature of their customer interaction:
Four sectors, Food Services & Drinking Places, Clothing & Accessories Stores, Electronics & Appliances Stores and Department Stores have all suffered from the effects of the pandemic. This doesn’t even consider the Travel and Entertainment sectors that have been decimated. Nor does it show the potential impact on the Commercial Real Estate sector over the next few years. This is just retail.
So, how are people changing their spending patterns?
They are shopping online. Non-store Retailers and Sporting Goods, Hobby and Book Stores are both up over 20%! I have it on good authority that some liquor stores in Little Rock that deliver are experiencing 20+% growth also.
So, what’s going on here? There are “thought flows” that are creating this spending effect:
- “Even if we can’t travel, we can still shop.”
- “If we can’t go the gym, we can buy our own stationary bike.”
- “Since I’m stuck in this house, I think I’ll spiff up the decor and landscape!”
- “I think it’s time to get a new car, while I’m at it.”
That gives you a general idea as to some of the drivers in the Stock Market. The obvious impact is going to come from those businesses that haven’t survived and eventually don’t survive. We’ve noticed several higher-end clothing stores that have closed. Certain restaurants have already closed. While we don’t have one here, Fryes Electronics has closed. The malls are pretty much ghost towns. It will be interesting to see who hangs on until this summer.
It will be helpful for whatever COVID relief package Congress passes to happen sooner, not later. In any event, we’re not at the edge of a precipice. We do have issues that need to be addressed. Yet, I hope this gives you a better perspective on what is actually happening on the consumption side – a critical aspect of our Economy.
As always, we are here for you. Please email or call if you want to set up a Zoom videoconference meeting or talk by phone.
Rick Adkins, CFP®, ChFC, MBA
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