A matter of perspective

When looking at the market, and its reaction to some of today's news stories, we're compelled to share some perspective.  There is so much talk about the length of the Bull Market and when the next recession will come that it appears some investors may not be able to see the forest for the trees.  

One of the TOP TRENDING STORIES today was, Retail disappointments, energy decline hit Wall Street. (1)   "Target Corp said on Tuesday that third-quarter profit missed estimates as investments in its online business, higher wages in a tight labor market and price cuts hurt margins and a big jump in inventories ahead of the critical holiday season worried investors.  Target shares tumbled as much as 15 percent as the retailer also reported that comparable sales missed expectations." (1)  

The selling pressure on Target suggests investors may be missing the bigger story here.  First, as was stated above, Target has been INVESTING HEAVILY IN ITS ONLINE BUSINESS,  and second, Target expects to have a good holiday shopping season, so they have INCREASED their inventory quite substantially.  In going through Target's numbers, we see that their 2018 3rd Quarter results are actually quite healthy.  Their year-over-year comparable store sales growth is +5.1%, and their adjusted earnings-per-share are +20% as compared to 3rd Quarter 2017.  

Interestingly, the results that Target achieved were very much in line with what its management had expected.  However, they fell short of consensus expectations.  With respect to the inventory build, Target increased its inventory +18% higher than it was in the 3rd Quarter of 2017.  Perhaps the +49% increase in their digital sales last quarter has Target preparing for a robust holiday shopping season.  Similar positive trends have been seen in other retailers like Walmart and Macy's.  

Despite the continued strength in the US economy and the healthy economic data that persists, many investors attention returns to the question of whether or not now is the beginning of the next bear market.  We continue to find little evidence to suggest the bull market is over.  The data indicates the US economy will continue its growth, and that despite the current volatility, equities continue to be attractive. 

1.  Reuters news - 11/20/2018 Caroline Valetkevitch

 


 

Brian Amidei is Coachella Valley's only Barron's Magazine Top 1,000 Advisor in 2013 and 2014!

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The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided.  Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf

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Data Sources:  News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations.  Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates).  All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. 

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