This Santa Claus stock rally will not spur increased spending

No, Virginia there is no Santa Claus.

Unfortunately, Virginia now works for the National Retail Federation, which came out with its projection for holiday gift spending for this year.

The biased report from the house organ for retailers believes spending will grow by 4% to to $682 billion. The report does have a shred of reality in it when it says that hiring will be lower.

However its reasoning is not because of the large amount of retailers that have closed up shop this year, no the report cites hurricane damage in Texas and Florida as the driver for depressed hiring.

The NRF report is not the rosiest report on the street. PwC — formerly PriceWaterhouseCooper — believes US consumers will dig even deeper into their pockets with a 6% increase in holiday spending.

This report suggests that the upper middle class — who are enjoying record stock market gains — will spend even more than the 6% the report suggests, while lower-income brackets will pull back from last year’s gift buying.

“The S&P 500 is roughly 15 percent higher than it was a year ago,” said PwC senior analyst Krystin Weseman, “so wealthier people see that lift to their financial portfolios, feel richer and more confident, and therefore are willing to spend more even if their regular wage at work hasn’t moved much.”

Both of these reports are so flawed, I caution against acting on this by buying any retail stock in the hopes of a rebound.

Most of Americans are not enjoying this stock market soaring to daily new highs to use profits to up their gift giving. If they are in the market it is through a 401(k), which will not give them access to the profits.

Are Americans so flush that they will take a loan from their retirement fund to buy holiday cheer? No, not going to happen.

This is the same reason there is no inflation due to the run up in the markets. There is no access to the profit to spur spending, which came cause price inflation due to increased demand.

So Virginia, let’s talk in late January when the real sales numbers come in lower than last year.

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