As the economy enters the final stretch of the year, it is time to discuss the holiday sale season. A little known fact: roughly 1/3 of all retail sales for the year occur in the last quarter, and retail sales makes up about 2/3 of US GDP. Due to the lateness of Thanksgiving, there are about 5-6 less shopping days. Wall Street is not expecting a robust holiday season and the data coming out of Black Friday supports their hypothesis with sales coming in down 2.7% even with foot traffic coming in up almost 2% from last year. However, there are more people shopping on line and it remains to be seen were this takes retail sales numbers. We do expect margins to be squeezed at the retail level due to the enormity of competition and discounting.
Additionally, we received some good economic data this morning as the ISM non-manufacturing data came in ahead of expectations, but the feel of the market is lukewarm at this point, as P/E ratios are already pushing the limits. We do expect a pullback, it is just a question of when?