Now that we are in the fourth quarter, Paul Mampilly says that we will be hearing about holiday shopping estimates in the near future. The way that shoppers buy for the holidays tells us a lot about the economy and which stores are the most popular.
Paul Mampilly has been offering his advice on the stocks that he believes people ought to purchase for several years. He has been asked his opinion on Fox News, Kiplingers, Reuters, Hedge Fund Intelligence, Bloomberg TV, Fox Business News and CNBC. Currently, he is the editor of Profits Unlimited, a newsletter in which he recommends stocks to his readership that he expects to begin climbing higher.
Paul Mampilly earned his Master of Business Administration from Fordham University in 1996. He made a name for himself when he won the Templeton Foundation Investment Competition in 2009. He came in first place with a portfolio that was worth $50 million.
As you may have guessed, things appear to be going well financially as people are out spending a lot of money. After all, two-thirds of the gross domestic product is consumer spending, but the main focus will be shopping that is done online.
Retail stocks have shown us interesting things over the years. Some have been doing really well, but others have performed worse than any other stocks on the market. The lesson that was learned was that consumers want nothing to do with a store that doesn’t have an online presence. Apparently, online shopping is growing faster than any other type in America.
Since 2014, online shopping has been increasing, and in the fourth quarter, online sales are expected to grow more than 16 percent. That equals $17.25 billion!
That is astronomical!
Experts believe that sales for companies in the S&P 500 will go up by 6 percent in the fourth quarter, and this is much higher than any other time before. In the beginning of 2013, the average growth rate was approximately 2.42 percent.
In the event that online sales grow as much as the experts are saying that they will, this will mean that sales would have grown by 76 percent since the year 2014. So, it is obvious. One of the best places to invest your money is in S&P 500 companies during the holiday season.
At the moment, consumers are spending at sky-high levels, and consumer sentiment is also high, and online shopping is getting ready to increase as well. Just in time for this, online retailers were introduced to a new exchange-traded fund or ETF. This one stock allows you to invest your money in 22 different companies, and it is called “ProShares Online Retail ETF.” This ETF promises to be a great stock for investors in the coming months.
Everything appears to be going well for American consumers. Unemployment has reached its lowest levels in years, so consumer confidence has had a chance to grow and continues to increase this year.
Experts with Deloitte’s U.S. retail and distribution practice have stated that sales will increase by as much as 5.6 percent this year. In contrast, sales between November of 2017 and January of 2018 only increased by 5 percent. According to the U.S. Commerce Department, that was equal to $1.05 trillion. This year, Deloitte is predicting that sales will come to as much as $1.10 trillion.
A large part of this increase will be because of online sales. Deloitte also states that online sales will increase by 22 percent this holiday season. In the period from November of 2017 to January of 2018, online sales only grew by 16.6 percent. Last year, Deloitte stated that online sales brought in $110 billion, but this year, they believe that online sales will generate as much as $134 billion.
Retailers are becoming accustomed to online shopping and have adapted their businesses to accommodate it. Now, retailers are mostly concerned with their shares rather than whether or not the sale was made in a store or online.
Deloitte states that retailers are in the process of making things easier for consumers to purchase online, so they are paying more attention to the online shopping experience. For example, retail stores are looking for ways to make checking out easier for both their in-store customers and online consumers. Deloitte is expecting to see more options for consumers to purchase online and pick up their goods in the stores. They will also increase their numbers of promotions and will make it easier to confirm a purchase.
Retailers are aware that they will win the battle if they offer their customers the greatest conveniences. They also know that they may need to spend a little money to do it.
The National Retail Federation has also weighed in on this issue, and it is expecting retail sales to range between $717.45 billion and $720.89 billion. If this turns out to be the case, this would be an increase between 4.3 percent and 4.8 percent over last holiday season. In the past five years, the economy has been growing at 3.9 percent.
Last year, retail sales increased by 5.3 percent, and this was the greatest increase in the last 12 years. The numbers are not expected to be this high this year. Prices were as high as they were last year because wages were increasing, more people were employed and consumer confidence was growing. Americans were also promised tax cuts, so they ended up spending more than they ordinarily would have. Chief Economist Jack Kleinhenz stated that holiday sales were equal to $687.87 billion in 2017.
The unemployment level has fallen dramatically, but retail stores are getting ready to cause it to go down even further. These retailers need to offer new employees even better incentives to apply for seasonal jobs at their stores. Now, retail stores are increasing their starting wages, and they are giving their employees even longer paternity and maternity leaves. Last year, retailers only hired 582,500 seasonal workers, but this year, they expect to hire between 585,000 and 650,000 seasonal workers.
In one example, Target has decided to hire 120,000 seasonal workers this year who will take over the online orders. This will be an increase of 20 percent. The hourly wage will even be higher at $12, and they will also receive a 10 percent discount on items purchased on Target.com as well as a 20 percent discount on Target merchandise. Macy’s will also hire seasonal workers to take control of online orders and in-store orders.
Amazon has gotten into the act as well. Employees received a raise to $15 an hour, but they lost their stock award schemes and monthly bonuses.
Deloitte is stating that the economy is going strong, but there are a few reasons why the growth could stop this year. One reason is that there could be a major correction in the stock markets. The other reason is that there could be an increase in political unrest. Tensions between the U.S. and China are escalating as tariffs are a possibility, and retailers are concerned about this right now. This may be a concern for the future, but it is not expected to affect consumer buying decisions at the present time.
Although it is not the time to worry about tariffs, President Donald Trump has promised to place 10 percent tariffs on $200 billion worth of Chinese exports this year. They will increase to 25 percent on January 1, 2019, and department stores expect to be affected by this.
The possibility of a trade war that could get out of control is of concern, but retailers believe that consumers will continue to buy throughout the holiday season.
Paul Mampilly is recommending several ETFs this season, and they are:
- Vanguard Consumer Discretionary ETF
- iShares US Consumer Services ETF
- SPDR S&P Retail ETF
- Fidelity MSCI Consumer Discretionary Index ETF
- Amplify Online Retail ETF
- Fine Trust Consumer Discretionary AlphaDEX Fund