Source: Zhitong Finance "Since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%)." With the rebound of the stock market, the old adage "Sell in May and Go Away" seems to have been a bad advice once again. Last month, the S&P 500 index rose 4.8%, the best May performance since 2009. The NASDAQ 100 index rose nearly 6.2%, and the NASDAQ Composite Index rose 6.9%. Goldman Sachs FICC & Equities Trading Division said: "History doesn't really support this saying. Don't sell, leave the market (go on vacation), and enjoy the good times." The rising trend is still to be continued? If history is any guide, it may indicate that the rise of the stock market is not over yet. Looking ahead to the rest of 2024, Scott Rubner, Managing Director of the Goldman Sachs Global Markets Division and tactical expert, pointed out the following historical background for investors. Rubner stated that the S&P 500 index has risen 10.7% year-to-date, and since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%). "Since 1950, the median return of the last 7 months of each year (June 1 to December 31) is 5.4%. In the aforementioned 21 cases, the average performance of the last 7 months increased to 8.1%." Rubner added. Rubner also pointed out that the NASDAQ index has risen for 16 consecutive Julys, with an average return of about 4.64%.

The recently released financial reports of usa retailers show that the advantages of retail trade giants are expanding.$Walmart (WMT.US)$、$Amazon (AMZN.US)$such as $Target (TGT.US)$ 、$Kohl's Corp (KSS.US)$Retailers with weaker competitiveness performed poorly. This divergence highlights that due to inflation and rising living costs, consumers in the usa have become more discerning and selective in their purchasing decisions.

The national retail federation (NRF) predicts that holiday spending this year will grow by 2.5%-3.5% year-on-year, reaching a total of 979.5 billion to 989 billion USD. Although the increase is lower than the 3.9% in 2022, it still indicates consumer willingness to spend. Neil Saunders, managing director of GlobalData Retail, pointed out: "Consumers are still spending, but budgets are tighter, forcing them to prioritize more competitive retailers."

This year, consumers are more focused on practicality and value, with retailers attracting them through aggressive pricing, such as walmart continuing to push its low price strategy, while target has reduced prices on 2,000 items. Online shopping during the usa 'Black Friday' set records, giving consumers more options and room for comparison, and retailers launched a large number of discounts.$Best Buy (BBY.US)$Low prices attracted more consumers, especially retailers relying on non-essential commodities such as target and kohl's corp are facing challenges, while walmart and.$Costco (COST.US)$This performed better due to a focus on essential commodities.

Discounts and online shopping are favored.

So far, the holiday shopping season has shown mixed results. In-store sales on black friday only increased by 0.7% year-on-year, but online spending surged by 14.6% (mastercard data), thanks to aggressive promotions by retailers and e-commerce platforms during this period.

NRF estimates that approximately 0.197 billion people shopped from thanksgiving to cyber monday, exceeding predictions by nearly 14 million. Adobe reported that cyber monday online shopping reached 13.3 billion USD, a year-on-year increase of 7.3%, while black friday online shopping totaled 10.8 billion USD, with consumers enjoying significant discounts on electronics, toys, and other commodities.

Retailers promote Cyber Monday discount events through push notifications, emails, and other means to attract price-sensitive consumers. For example, Target launched a "Two-Day Cyber Monday" event, offering discounts of up to 50% on thousands of commodities such as games and home decor.

The boom in online shopping: low prices sweep retailers.

Retailers are all focusing on their online business. Online, retailers like walmart and amazon rely on generative ai customer service and search capabilities, making it easier for shoppers to find products on their websites and mobile apps.

According to salesforce's estimates, last Saturday, retailers using generative ai tools for customer service found that user purchase rates increased by 15%. Adobe reported that on Cyber Monday, traffic from chatbots or shoppers clicking links to retail websites increased by 1950% over the entire weekend compared to Black Friday. Salesforce's data also showed that the use of AI-driven online chat services on Black Friday increased by 31% year-on-year, with digital retailers using generative AI having conversion rates 9% higher than those that did not.

Mastercard economist Meyer stated, "A large portion of consumer spending is done online because, as a consumer, you have the most power and choices online." Adobe reports that e-commerce prices have fallen for 26 consecutive months, helping to save budgets and boost demand in the face of inflation.

The financial reports of retailers also reflect this trend. The online business of e-commerce giants like amazon and walmart is strong. walmart's e-commerce sales in the United States increased by 22%, driven by in-store pickup and delivery services, with Walmart Connect's advertising and its online business also achieving a 26% year-on-year growth; membership revenue also achieved double-digit growth.

Amazon's online store revenue grew by 7% in the third quarter, reaching 61.4 billion USD. One of Amazon's biggest competitors, the Canadian e-commerce giant.$Shopify (SHOP.US)$The latest financial report released exceeded Wall Street's expectations, showing that total revenue for the third quarter increased by approximately 26%, surpassing the analyst average expectation of 2.12 billion USD.

Notably, amazon mentioned in its earnings call that the significant difference on the consumer side from previous quarters is that their price awareness has increased, leading them to prefer products with lower average selling prices.

At the same time, promotional activities on the platform have also ramped up. As online shopping gradually becomes popular in the USA, Chinese e-commerce platforms have gained favor from many consumers, with platforms like Temu and Shein, which compete primarily on price, joining this promotional battle. Data company Facteus indicates that Shein,$PDD Holdings (PDD.US)$The sales of retail e-commerce platforms such as Temu and TikTok Shop under ByteDance have seen a significant year-on-year increase in the seven days ending last Friday.

In addition, Amazon pointed out that its platform tends to sell more of its own branded everyday essentials, an advantage that aligns with walmart. Walmart is capable of launching more affordable private labels and has long been a price leader because it derives pricing power from its scale and passes that pricing power on to customers, making it suitable for consumers looking to save on cheap necessities amidst inflation and high interest rates.

In contrast, the performance of retailers like Target, kohl's corp, and best buy, which are at a disadvantage in e-commerce, has been relatively weak. These three large department stores have all lowered their annual performance guidance.

Consumers are cautious about non-essential spending.

Although American consumers continue to spend, there are also signs that they are still cautious. Still impacted by high inflation, American consumers are influenced by tightening wallets, consequently reducing non-essential expenditures. A notable example is the performance difference in the third quarter between the two retail giants, walmart and Target.

On November 21, Target announced a disappointing third-quarter earnings report, causing its stock price to drop to a 52-week low; while the day before, walmart's stock price soared to an all-time high. The earnings report showed that Target's Q3 sales fell short of expectations, and it lowered its adjusted earnings per share guidance for the year. In contrast, walmart raised its yearly performance forecast, indicating a stronger sales trend. In terms of same-store sales, walmart achieved a year-on-year growth of 5.3%, while Target's growth was only 0.3%.

Unlike Target, walmart focuses more on grocery and other 'essential' product categories, which have relatively stable demand throughout economic cycles. Walmart's value orientation and well-executed digital strategy are key to attracting high-income households and winning market share in groceries. The vast differences between these two major retailers illustrate consumers' willingness to spend and cut back in different domains—American consumers remain cautious about non-essential spending.

Goldman Sachs retail analyst Kate McShane believes that one of the root causes of Target's troubles lies in its commodity mix. About 60% of Target's sales come from non-essential items, such as housewares and outfits, whereas Walmart's sales come primarily from essential goods, with about 60% attributed to everyday necessities. This commodity mix has led to fluctuations and instability in Target's performance.

Amazon also pointed out in its earnings conference call that the impact currently seen is a very clear demand from buyers for daily necessities, with a rapid increase in order volume. In contrast, the management of the home improvement giant $Home Depot (HD.US)$and $Lowe's Companies (LOW.US)$ indicated that due to the existing housing sales remaining at the lowest level in 20 years, the demand for non-essential large home renovation projects and other large items remains sluggish.

Conclusion:

Despite the resilience in consumer spending, American consumers are shifting towards a more cost-conscious approach due to high credit card debt and rising interest rates. The Federal Reserve's economic beige book indicates that consumers' sensitivity to prices has further increased.

This trend warns of potential weaknesses in the USA economy, indicating that the growth in consumer spending may not be as robust as retail data and major corporations' earnings reports suggest. Price sensitivity limits companies' ability to pass on costs, and wage growth is also not as optimistic as non-farm payroll reports indicate. Consumer spending accounts for 70%-80% of USA GDP, and its weakness could heavily impact the labor market and the overall economy.

Potential tariff measures next year may exacerbate inflation, weakening purchasing power and further dragging down consumption. NRF analysis shows that a 10%-20% tariff could raise prices across six major retail categories, costing consumers an annual loss of purchasing power between $46.2 billion and $76.7 billion, equivalent to an additional spending increase of $362 to $624. Meanwhile, immigration restrictions may tighten the labor market, increasing costs for retailers.

Editor / jayden