The start of the Christmas shopping season has begun. In the U.S., Black Friday is the biggest shopping day of the year as consumers line up for hours just to be the first ones to take advantage of bargains at their local retail stores.
Black Friday is followed by Cyber Monday, which is the day that the most online shopping is done. Investors and analysts will be watching closely to see if the American consumer (the largest driving force of U.S. economic growth) is back. Many retail stores in the U.S. have been forecasting a good holiday shopping season, and this past weekend will be the first telling sign if this is true.
A good start to the Christmas shopping season will go a long way to offset the current macro worries for world economies. There's Ireland turning to the European Union for help with their country’s debt, with an accompanying fear that debt issues in that country, as well as Greece, could spread to other countries, like Portugal or Spain.
At the same time, we have heightened hostilities between North and South Korea, which is also weighing on the minds of investors. If that wasn’t enough, there is news coming out of China indicating that their government is trying to slow down their overheating economy by raising interest rates and bank reserves. With all this negative news in the world these days, a good turnout for the American consumer over this holiday season would be a welcome and much needed positive spark for the global markets.
This week is an important week for other news as well. We will receive quarterly reports from our country’s largest banks. Not only will analysts be watching for how much money they made this past quarter, but also what the banks will say regarding dividend increases in the future. We are going to get American unemployment numbers, as well, which is always a big market mover as the U.S. tries to get more people back to work in order to drive their economy higher.
There is a lot of critical data coming out this week that can possibly move the North American markets in either direction. However, I believe the one thing to keep in mind as an investor, which trumps all this information, is the current interest rate environment. As long as the interest rate environment is accommodative and low, in my opinion, the equity market (stock market) will continue to move higher. There may be small setbacks along the way, but I feel the stock market will continue to move higher until this accommodative interest rate environment changes. Therefore I recommend continuing to look for good quality companies that are leaders in their sector, which are cheaply valued, and if possible, pay dividends. In my opinion, this recipe for success should continue to work for investors.
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Allan Small is an Investment Advisor with Dundee Securities Corporation, a DundeeWealth Inc. Company. This is not an official publication of Dundee Securities and the author is not a Dundee Securities analyst. The views expressed are those of the author alone, and are not necessarily those of Dundee Securities or Metro Canada.