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STA Weekly Report – Will the Holidays bring retail cheer?

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INSIDE THIS EDITION:
Will the Holidays bring retail cheer?
Weekly Snapshot of Global Asset Class Performance
Year-End Tax and Financial Planning Ideas

401k Plan Manager

We are on the cusp of entering the important holiday season for retailers. According to the National Retail Federation (NRF), holiday sales represent approximately 20% of annual retail sales. However, there is some variation depending on the type of retailer in question. For example, many toy retailers report that as much as 30% of their sales coming during the holiday season, a sizeable percentage that also may represent the point during the year when retailers become profitable.

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In the United States, we live in a consumer driven economy. As a result, the strength of the retail sector can also be a good indicator of the strength of the economy as well as consumer- and business- sentiment. Take for example the impact that expected retail sales strength during the holidays can have on employment, at least temporarily. When sales are expected to be strong during the holidays, retailers increase hiring of temporary workers to meet demand while weak expected retail sales during the holiday season can lead to less aggressive hiring.

Over the last few years, retailers have turned in mixed results. In 2018 for example, retail sales grew 2.1% on a year over year basis compared to 5.2% in 2017. As this indicates, 2018 sales growth was paltry in the context of other years, but it was with very good reason. Consider for instance the concerns that consumers had last year over a possible government shut down, stock market volatility and ongoing trade uncertainty with China.

Consumers and investors are asking themselves is what price impact tariffs may have on prices and spending this year. Consumers appear worried about higher prices based on an NRF survey conducted in September that showed 79% were concerned about price increases that could change their buying behavior. Truthfully, it should not surprise anyone to see tariff impacts to prices, especially in categories like apparel, footwear and technology that have now been subject to new tariffs that kicked in on September 1st of this year. With additional tariffs set to impact other goods on December 15, 2019 the impact in those other product categories may also be felt not only by consumers but also by the retailers.

The National Retail Federation currently expects that holiday sales occurring between November and December of this year will increase somewhere between 3.8% and 4.2% over last year. In dollar terms, this would put aggregate holiday sales for the year anywhere between $727.9B and $730.7B. This estimate excludes automobile dealers, gasoline stations and restaurants. What that also means is that consumers on average are expected to spend $1,047.83 each during this holiday season, an increase over the $1,007.24 they estimated last year.

The expected improvement year-over-year coincides with survey results from the first week of November, which showed that 56% of consumers had already started their holiday shopping, a 1% uptick compared to 2018, but in line with both 2016 and 2017.  

Over the five days following Thanksgiving, consumers are expected to hit both the malls and the internet as they work toward completing their holiday shopping. In fact, 39.6M people will shop on Thanksgiving Day, 114.6M on Black Friday, more than 66.5M on Small Business Saturday and 33.3M on Sunday following Thanksgiving. To close out the post-Thanksgiving retail rush, cyber Monday is expected to draw 68.7M additional shoppers.

With numbers like this it is no wonder that company’s like Best Buy and Dick’s Sporting Goods have already raised their forecasts and we would not be surprised to see others follow suit as the American Consumer continues to be helped by a benign macroeconomic backdrop, a resilient stock market, and plenty of cash and credit to help end this year on a high note.

Weekly Global Asset Class Performance

Year-End Tax and Financial Planning Ideas

Written by Scott A. Bishop, MBA, CPA/PFS, CFP® and Michael Churchill, CPA/MSPA

The end of the year presents a unique opportunity to self-reflect about your personal financial planning situation. With factors like tax law changes, life changes, or simply working towards your goals, now is an especially important time to review things. It is always a good time to see if you are on-track at your stage in life. Taking what we now know about the new tax law, the Tax Cuts and Jobs Act of 2017, and weaving together all of the other areas of your personal finances is one of the key ways we provide value to you as your trusted advisor. Below are some things we’d like to help you think through before the year ends.

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Disclaimer:

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by STA Wealth Management, LLC), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from STA Wealth Management, LLC. Please remember to contact STA Wealth Management, LLC, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. STA Wealth Management, LLC is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the STA Wealth Management, LLC’s current written disclosure statement discussing our advisory services and fees continues to remain available upon request.

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