Market Review November 2019

  • Robert Santarpia

Consumer Confidence Continues to Drop for Fourth Straight Month

The holiday season is often a time in which consumer confidence and activity is ramping up. According to The Conference Board via Bloomberg, however, consumer confidence shows no signs of ticking upwards for the remainder of 2019. Jobs gains as well as steady wage growth in key sectors have kept consumer spending chugging along since 2017. While the confidence of American consumers is dropping, it also appears that the future is dim in the eyes of the country’s people as well. 17.2% of The Conference Board’s surveys said business conditions would be better in the coming six months, down from 18.7% in October.

It’s not as if consumer confidence decays the economy in actuality. That being said, it appears that consumer confidence is mirroring expected economic growth for 2019 Q4. As Americans feel less confident in job growth, wage growth, and the overall economic health of the country, spending could slow through the holidays and into 2020. Unfortunately, many companies count on steady spending this time of year, and significant caution in consumers could cause headaches heading into the new year.

Home Prices Rebound After Shaky 2019

The S&P CoreLogic Case-Shiller U.S. National Home Price Index keeps an eye on home prices across the United States. This measuring tool helps to keep track of which cities are showing growth in the price of homes, and which are in decline. 2019’s home prices have been incredibly slow since the Spring, marking months of deceleration from coast to coast. The index is now showing that home prices rose 3.2% annually in September, up from a 3.1% gain in August. The bump in prices is hard to pinpoint directly, but since June, the average rate on the 30-year fixed has hovered between 3.6% and 4%. This gives home buyers a bit more power in the bargaining process, which helps to spark prices in growing cities predominantly consisting of cheaper-than-average homes and costs of living.

Cities like Phoenix, Tampa, and Charlotte are the three most improved cities in terms of home prices; all cities are reporting annual gains above 4%. While these cities aren’t known for a low cost of living, they are less expensive, on average, than other major nearby cities. Unfortunately, these cities and most in America are experiencing a housing shortage. With low mortgage rates and a generation of people entering adulthood and looking to buy homes, pricing gains are to be expected with a low supply and high demand.

Tesla Ramps up Electric Truck Race

The Tesla Cybertruck dominated headlines this month after a reveal event. Elon Musk introduced the public to the Cybertruck and offered three price points varying in features. The base version of the vehicle will run $39,900, with additional tiers of $49,900 and $69,900 earning more features and miles per charge. Tesla says the most expensive Cybertruck is going to get up to 500 miles per charge. While the truck isn’t expected until 2021, it’s already ramping up the electric truck race, which includes well-known carmakers and rising stars.

GM is planning its own electric truck by 2021 as well. Ford, the No. 2 U.S. automaker, is promising $11.5 billion in funds to electrify its vehicles by 2022, including its popular F-Series trucks. Michigan-based Rivian is also a top player in the electric truck battle, with a $69,000 model launching in fall 2020. Rivian also received $500 million for a part of their vehicle, and a $700 million investment from Amazon with plans to use their vehicles for order delivery. Despite these competitors, the Cybertruck seems like the model to beat, although some of that might be due to the attention Musk and Tesla receive after every new product reveal.

CBO Releases Updated Findings in Minimum Wage Research

The Congressional Budget Office is a non-partisan analysis source for Congress. Although healthcare and taxes are getting a lot of attention leading up to Election 2020, the minimum wage is consistently inserted into debates and conversation on the future of America’s economy. A new CBO study finds that if the minimum wage is raised to $15 by 2026, there will certainly be some significant changes to the economy worth considering. For starters, the move to a $15 minimum wage will decrease the number of people in poverty, helping between 1 million and 1.5 million people to cross the poverty threshold. Of course, other changes come as well, some of which aren’t as positive.

The CBO’s research shows as minimum hourly wages rise, less people will be employed. While the findings show a decrease in employment per week, you’ll see on the study that the bulk of the descension occurs through the transition from now through 2026, when the gradual minimum wage increases reaches its peak. From there, weekly employment stagnates, still about 1 million workers fewer than at the beginning of the wage increases.

The great thing about the CBO’s study is that charts like the ones above change as you look at various approaches to a minimum wage increase, including the House-passed Raise the Wage Act at dollar amount intervals of $10, $12, and $15. While the Raise the Wage Act was passed in the House on July 18, 2019, the Senate has yet to take up the bill.

The Biggest Winner Ahead of Holiday 2019: Best Buy

When we consider the decreases in consumer confidence, we have to remember the sheer power of the holiday season in consumer retail. While many companies plan for annual-high profits this time of year, it never hurts to have some momentum heading into Q4. This holiday season, that momentum seems to be charging Best Buy into a huge end to the year, according to company reports per CNBC.. In the third quarter, Best Buy reported a net income increase to $293 million, or $1.10 per share, from $277 million, or 99 cents per share, a year earlier. This is leading to the retailer raising its forecast for fiscal 2020 adjusted earnings.

The retailer once known for selling CDs and other small electronics is now reaping the rewards of a diversified product inventory. The company is now a leader in large and small appliances, cell phone hardware and accessories, and popular products from Google and Apple. With a strong marketing plan in place under new CEO and the National Retail Federation calling for high holiday sales numbers, Best Buy might be set to be the retailer to beat heading into 2020.

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