Is the consumer finally spending some of that gasoline-pump windfall? Is that money finally flowing back into the economy instead of being stuck in bank accounts earning next to nothing?
For the longest time, far longer than we thought, the money had stayed in the pockets of the consumers. A couple of quarters ago, Visa (V) came out with numbers that showed the consumer either hadn't altered behavior because of the low prices at the pump or didn't think they would last. It was almost as if the spare change, which could amount to as much as $1,000 a year for the heavy users, just didn't matter.
Then, out of nowhere, it seems to have taken hold. This morning, Steve Liesman presented information from the JPMorgan Institute that showed definitively that the consumer's now spending that money at retail, particularly in restaurants and supermarkets. Visa's a huge information source, but JPMorgan looked at 25 million accounts and showed empirically that there's a big pickup in retail spending.
This is spectacular news for one of the most ailing parts of the stock market, as the retailers and restaurants had been in a bit of a funk ever since what seemed to be a fizzling back-to-school season. Now we are seeing that empirical study rubbing off on stocks. L Brands (LB) today gave you monthly numbers that were extraordinary, much better than expected, particularly for Bath & Body Works and Victoria's Secret. That stock's not hitting an all-time high idly. For what seemed to be ages, no one wanted to touch Costco (COST). They would rather shop there then buy the stock. But today's numbers, 8% comparable sales, show that the buyers' strike for the stock has not come and gone.
The spare change from the pump could be at the root of some of the strength in McDonald's (MCD), which hit an all-time high. I have liked the action in Ross Stores (ROST) and GameStop (GME) of late, and I can see how you can relate the gasoline money to both of them. We've got a bottom in Macy's (M) from the looks of things and J.C. Penney's (JCP) breaking out, deservedly so given the new management's aggressive nature. Lowe's (LOW) stock's taken off even as we haven't seen the numbers yet, and Home Depot (HD) remains one of the best performers in the Dow. You can even be encouraged by VF Corp. (VFC) and PVH's (PVH) moves. And Nike (NKE)? Best in show. Just won't quit.
Now there's always a tendency in this market to ask, "How long can this last?" There's an assumption that every move higher is ephemeral, which is all part of the rolling bear market that I talk about endlessly, the pummeling of individual sectors beyond all recognition while others prosper.
However, if you want a real kick to the consumer, wait until she sees her heating bills. With natural gas hovering at 15-year lows, more savings are ahead. That's how the majority of homes get heated these days. And if you use propane, all I can say is you are going to be shifting from McDonald's to Olive Garden, you will have that much spare change left over.
Other than if you own shares in an oil company that can't pay the bills or have been stuck in Petrobras -- aptly symboled PBR because its $5 price tag can buy you a six-pack -- this is strictly a feel-good story. Or, I should say, a feel-good story where you can make money buying the stocks of the very retailers you're spending that spare cash at. And I think it's only going to get better from here for the stocks of restaurants, apparel companies and retailers, one of the most challenged sectors of 2015.