In what was basically a flat week for the S&P, the market was still able to tell us quite a bit about investor demand for stocks. The big news for the week was the Trump press conference, which is still under debate by the media and various political and financial pundits. Here on Real Money, the opinion that we care about most is the market's, and the market has shown us that investors are trusting in Trump. After initially selling off after the presser, stocks staged an impressive rebound from the lows of the week on Thursday and then closed higher on Friday after a solid retail sales report.
Friday's retail sales report showed continued strength for December, with overall growth of 0.6% from last month and 4.1% growth year over year. The online sales subcomponent of the report, which has become the most important government supplied economic metric for retail sales given the dominance of online sales, showed significant strength. Online sales were up 1.3% for the month and 13.2% from last December.
The online vs. bricks and mortar sales story is old news at this point. We know that online sales are the preferred medium for consumers and that mainstream retailers like Walmart (WMT) and Target (TGT) have acknowledged this as their focus, and their percentage of online sales have grown significantly. The above chart shows how online sales growth has accelerated in recent times. For those who like technical analysis, the green line (% year over year growth) looks like its attempting to break out. We can see a similar story in overall retail sales as shown below:
Of course, this brings us right back to the major catalyst of 2017, which is Trump. If Trump is successful, we will see these charts continue their upward momentum. As I wrote last week, companies and markets are taking a Trump success seriously now, and so should we. Just this weekend, we got news from General Motors (GM) that it would be investing additional money in the US and creating 1,000 new jobs. The line of companies listening to Trump continues to grow. Trump aside, the bottom line with retail sales and consumption in general is that the consumer finished 2016 on a very strong note. This has all been made possible because of a strong labor market which is what we will be focused on for 2017 as well.
So far, markets have a risk-off tone to them this morning as the S&P futures are trading lower following lower moves in European indices. We have quite a bit of international news this week starting with UK Prime Minister May speaking today about a "hard Brexit" break from the EU. Given how we saw markets rebound from the original Brexit vote, it's hard to get too worried about this situation for now. Then we have the annual World Economic Forum (WEF) taking place in Davos, Switzerland, from which we will be getting a stream of headlines from various economic heavyweights that are sure to swing markets one way or another. As always, our game plan is to stay focused on the actual data, like the Empire State Manufacturing Survey due out 8:30 am EST.