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Chart of the week

Competing data confound markets again

Retail sales data and sentiment moved in opposite directions. This week’s chart looks at the divide, why the competing data could drive volatility.

January 20, 2023 | 2 minute read

Retail sales fall as consumer sentiment recovers

Federal Reserve Bank of St. Louis and Univ. of Michigan surveys of consumers, as of January 18, 2023. Real retail sales refers to retail sales minus consumer price index. Consumer sentiment refers to the University of Michigan Index of Consumer Sentiment.

  • Following a solid rebound at the start of the year driven by investor optimism that the Fed may engineer a soft landing for the U.S. economy, stocks fell this week amid weak economic data and continued hawkishness among Fed speakers.
  • The Q4 earnings season is still young, yet annual earnings are expected to fall -3.9%, which would mark the first annual earnings decline since Q3 2020.1 Forward earnings guidance through the first half of 2023 is also not encouraging.
  • Retail sales fell for the second consecutive month based on this week’s report, while the Fed’s beige book added to the negative investor sentiment as businesses remain pessimistic about growth in early 2023.2
  • While retail sales missed expectations, consumer sentiment figures painted a contrasting picture as January’s reading was up 8% from a month earlier and 4% year-over-year, driven by easing inflation, rising incomes and a still very strong employment picture.2
  • The divide between retail spending and sentiment underscores the messy picture that may define markets in 2023 and dogged them through most of 2022. Against this backdrop, investors would be wise remaining prepared for continued market volatility while seeking alternative sources of income and total return.

  • Source: FactSet, based on S&P earnings.

  • Federal Reserve Bank of St. Louis and Univ. of Michigan surveys of consumers, as of January 18, 2023. Real retail sales refers to retail sales minus consumer price index. Consumer sentiment refers to the University of Michigan Index of Consumer Sentiment.

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