September 20, 2023

Investors await a consumer meltdown: Morning Brief

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As I have often told people who ask, the external environment should be one’s observation deck for potential investments.

To that end, I splurged on a pair of low $120 Nike dunks over the 4th of July weekend. What better way to show off how cool your aging 40-year-old self is at the office than rocking some sweet Nike dunks a day after the manufacturer issued lackluster guidance and stocks plummeted.

Interestingly enough, the Foot Locker store where I bought these expensive fountains of youth was generally empty. Usually, the Fourth of July weekend is usually a hotbed of buying activity for things you don’t really need but want. And maybe it was in other states, just not this particular store at this particular point in time.

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What was not empty on the 4th of July weekend? The two no-frills Marshalls (owned and operated by TJX Companies) locations I stopped by for some silverware – one on Saturday and the other on Sunday. Both stores looked like angry bulls had run amok in the aisles – everything was so messy and nicked. Get in line at your peril, the places were mobbed with deal seekers.

These three holiday events sent me back to reconnecting with the state of consumer stocks ahead of the crucial back-to-school shopping season.

I was reminded how hated consumer names are right now, as shown in new data from Bank of America.

Consumer discretionary has the lowest exposure among hedge fund managers and long-only managers in the history of the Bank of America dataset.

“Resilient consumption in the face of inflationary pressures, a weakening labor market and a host of other factors is considered unsustainable by most portfolio managers,” said Savita, BofA’s chief equity strategist. Subramaic.

Subramanian added, “confidence in consumers is declining.”


The top 20 S&P 500 stocks with the most short positions – as presented by BofA – are dominated by companies that are considered consumer cyclicals.

The top five includes Dish Network (you definitely don’t need expensive Dish Network services); Ralph Lauren (don’t need an $80 polo shirt from Macy’s); CarMax (you can live a little longer with your 100,000 mile road warrior in a country with higher borrowing costs); Paramount (do you really need Paramount+); CH Robinson (a logistics play that ships things you probably don’t need).

This positioning smacks of investors banking on a consumer meltdown in the second half.

But perhaps all this negativity shouldn’t come as a surprise to consumers.

The labor market is slowing down. Stories of AI taking jobs continue to do the rounds (here’s what musician and tech investor Will.I.Am recently told us about the topic). Headline layoffs continue to tear through the economy (see Disney’s ESPN “talent” cuts).

Further, nagging inflation has eaten into trillions of dollars in pandemic savings.

The personal savings rate stands at 4.6%, down from the double digits at the height of the pandemic and below the long-term average of 8.3%.

You can’t spend much if your salary barely comes around and your savings account is as dried up as the Sahara.

Should you use this moment to go against the crowd and bring in retailers and other consumer-facing stocks. Beat me, I just buy Nike dunks and do news – I don’t pick stocks anymore.

I will say this: It’s hard to get too excited about many of these names in light of possibly two more rate hikes, a declining personal savings rate and continued inflation.

Brian Sozzi is the editor-in-chief of Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn. Tips on deals, mergers, activist situations or anything else? Email to

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