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

© 2020 The Arkansas Financial Group, Inc., All rights reserved.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by The Arkansas Financial Group, Inc. (“AFG”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from AFG. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. AFG is neither a law firm, nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of AFG’s current written disclosure Brochure discussing our advisory services and fees is available upon request.

Please Note: If you are a AFG client, please remember to contact AFG, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. AFG shall continue to rely on the accuracy of information that you have provided.