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The U.S. Consumer Lifts Once-Maligned Retailers

Posted September 12, 2018

Brian Cornell, age 60, Target CEO, asserts that we are in the best consumer environment that he has seen in his 35-year

career. Target reported the best quarterly results in more than a decade as shares gained 33% this year. With the strongest same-store sales growth in 13 years, their digital sales are also up 40% compared to a year earlier. Many retailers have found a sweet spot with very strong results in their stores and growing online traffic. Here is a partial list of retailers enjoying success similar to Target’s: Nordstrom, Macy’s, Walmart, Kohl’s, T.J. Maxx, Ross, and Tiffany.

 In 2017, these retailers were in free fall, and it seemed they would not be able to compete. Thanks to investment in their stores, their online capacity,

and a very strong consumer environment, this turnaround looks miraculous.

 

Corporate Profits Take Off

The U.S. Commerce Department reports that after-tax profits on average for the whole spectrum of U.S. corporations rose by 16.1% in the spring quarter, and this marks the largest gain in six years. Also, the measurement of Gross Domestic Product (GDP) for the spring quarter has been revised upward from 4.1% to 4.2%. This is not a huge change, but it validates the positive trend. Earnings for small companies are up even more with a gain of 35% from a year earlier. U.S. small companies are generally shielded from trade war threats as the majority of their business is within the U.S. borders. Thankfully, these data regarding consumer spending and corporate profits overshadow the political and legal news coming out of Washington D.C. and New York City.

August Posts a Good Month for Bonds

The 10-year U.S. Treasury opened August with a yield of 3% and closed the month at 2.85%. The market prices for bonds move in the opposite direction of yields, so with yields moving down in August, the market value of bonds increased. In general, August was a good month to enjoy your bond allocation as most bond positions will show a gain for the month.

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