Monday’s consumer spending report was lower than expected, but it didn’t stop the market from continuing to snatch up shares of consumer discretionary stocks. That makes sense: employment gains are coming in strong; personal income is rising; and energy prices have yet to rally. It all adds up to a pretty picture for companies dependent on Americans spending on nonessential goods and services this year. I advised in February that consumer discretionary stocks were starting to rally, presaging a market rebound. That turned out to be true, and the stocks I recommended then — Mohawk Industries (NYSE: MHK) and Disney… Read More
Monday’s consumer spending report was lower than expected, but it didn’t stop the market from continuing to snatch up shares of consumer discretionary stocks. That makes sense: employment gains are coming in strong; personal income is rising; and energy prices have yet to rally. It all adds up to a pretty picture for companies dependent on Americans spending on nonessential goods and services this year. I advised in February that consumer discretionary stocks were starting to rally, presaging a market rebound. That turned out to be true, and the stocks I recommended then — Mohawk Industries (NYSE: MHK) and Disney (NYSE: DIS) — have both performed well since then. But some market observers think the more recent rally in consumer discretionary stocks is somehow a bad sign, indicating a market top. I disagree. While disappointing earnings could derail the market in the short run (and create bargains for high-quality companies’ shares), so far the earnings season has been better than expected. And investors’ continued faith in consumer discretionary shares is a solid indicator that the economy remains on the right track. #-ad_banner-#I wouldn’t add to your holdings in Mohawk and Disney at this point, although both are certainly worthy of… Read More