Monday, October 29, 2012

Stock Market: What Investors Could Learn From US Consumers

The stock market is still singing the blues. It seems that investors are scared by the alleged fiscal cliff (possible expiration of US public debt contracts which could cause massive tax rises), European debt crises and speculation on a hard landing of the Chinese economy. But the US consumer don´t give a f…..k.

This morning we got news that "U.S. consumers increased their spending in September by the fastest rate since late winter" (marketwatch). Last month consumer spending rose a seasonally adjusted 0.8%. The U.S. economy expanded at a 2% pace in the third quarter, up from 1.3% in the prior three-month period, largely because consumers boosted outlays, writes Marketwatch.

The US consumers are definitely more optimistic than the despondent investors. In spite of the gloomy headlines in the media they believe into the future of the US economy and the companies. Helpful are the gains on the stock market (S&P 500 rose 12% year to date) and the recovery of the US home market.

This is good news for the global economy. Consumer spending represents as much as 70% of the U.S. economy and is usually the biggest driver of growth. When Americans buy more goods and services, Volkswagen, Samsung, Gucci et. al. will export more goods to the US. Hence US consumers have been the engine of the recent stock market rally of the last 12 months.

I recon that the investors could learn from the consumers and return to the stock market. The ongoing consumer optimism is a major force for the stock market and will revitalize the rally because the rising costumer spending will drive company profits and stock prices further north.

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