In yesterday's column, "The Changing American Dream: From House to Car," I wrote about the dichotomy of weak housing and retail sales vs. strong auto sales.
The fact that this trend has been in place since the 2008 financial crisis implies that there may be something more substantial and longer term with respect to consumer attitudes than merely low interest rates and lengthened loan terms that are attracting buyers for autos vs. other sectors for consumption.
There is another trend that is occurring that does not appear to have been fully recognized yet by the financial sector because there is no ETF that focuses on it. That is the outperformance of specialty manufacturers and retailers, especially those in the sporting-goods sector.
Although housing and retail sales growth in aggregate has been stagnating for the past several years, the same is not true for many of the sporting-goods companies, most of which are in the small and middle capitalization space.
Although the performance of NIKE (NKE) is well discussed in the financial media, up year to date (YTD) by 8%, and with two- and five-year returns of 68% and 177% respectively, many of the smaller specialty companies with synergistic products have performed similarly.
Lululemon Athletica (LULU) has a YTD return of 17%, with two- and five-year returns of -2% and 195%, respectively.
Cabela's (CAB) has underperformed recently, with a YTD return of -1% and a two-year return of -22%, but with a five-year return that outpaces even Nike at 220%.
Columbia Sportswear (COLM) is up 30% YTD, with two- and five-year returns of 87% and 123%.
Nautilus (NLS), a gym equipment manufacturer, is up 45% YTD, 166% in the past two years and a phenomenal 908% in the past five years.
Brunswick (BC), principally a small watercraft manufacturer, is up 3% YTD, 65% in the past two years, and 212% in the past five.
Jarden (JAH), a camping supplies manufacturer, is up 12% YTD, 81% in the past two years, and 296% in the past five.
VF Corp. (VFC), a manufacturer of several active-lifestyle apparel brands, including The North Face and Timberland, is down 7% YTD but with two- and five-year returns of 48% and 252%, respectively.
There are many others that I track within the sporting-goods space, with all but a few greatly outperforming the S&P 500 and the Russell 2000 indices over the past five years.
By comparison, furniture company Ethan Allen Interiors (ETH) is down 19% YTD and 21% over the past two years, and up only 50% in the past five. Nova Lifestyle (NVFY) is down 22% YTD, with two- and five-year returns of -53% and -53%, respectively.
Bed manufacturer Tempur Sealy International (TPX) has performed better than the furniture companies with a YTD return of 15%, and two- and five-year returns of 42% and 81%, underperforming the S&P 500.
These consumption patterns and investment returns are replicated across the entire retail consumer space and are indicative of what appears to be a structural change in spending habits and lifestyle choices by younger consumers.
Instead of get job, get married, buy home, fill home with stuff, the younger consumers are exhibiting a pattern of get work, skip marriage, skip home and furnishings purchases, buy sport utility vehicle, consumer electronics, bicycle and sporting equipment, have fun.
Further, this pattern of shifting consumer preferences and attitudes that has been assumed to be a temporary and residual effect of the housing and financial market crises, at about five years old, is continuing to expand in what appears to be a fundamental generational shift.
Just as there is no ETF yet that has capitalized on this shift, indicating that the financial markets are either unaware of it or still believe it to be temporary, the public financial policymakers, both monetary and fiscal, appear to be unaware of it.
The entire purpose for the implementation of the last round of quantitative easing (QE3) was to stimulate housing sales, most especially by first-time buyers, by way of dragging down mortgage rates through the purchase of mortgage-backed securities by the Federal Reserve.
The outcome of QE3 was that it did cause buyers to take advantage of lower mortgage rates, which helped push the size of new homes up to new records, but it did not stimulate interest from first-time buyers.
This presents a substantial problem for economic growth potential as the foundation of the economy has been predicated on housing and housing-related sales since the creation of the Federal Housing Administration in 1934.