Investing with Consumer Confidence, Price and Retail Sales

Most things in our economy are interrelated. You have to know how to invest in stocks using these metrics that tell you how the economy is doing. If you can’t adjust your investment strategy based on these relationships, you will not be able to navigate or learn how to play the stock market.

Consumers are a huge part of our economy. That is why it is important to understand this interaction. Consumer confidence may be an indication of what the next retail sales report is going to look like. It’s not always correlated. We saw recently that retail sales was bigger than estimated. It’s not even always indicative of consumer discretionary spending. We saw that too recently with the auto sector.

Consumer price affects both as well. That is measured in the CPI which is essentially a measure of inflation. This will affect retail sales and especially stocks in this industry. You need to watch out for this all important indicator for the US economy.

The Conference Board comes out with a consumer confidence report that causes shifts in the stock market. There is a close relationship to this report, the economy and the financial markets. It is one of the ways you need to know how to invest in stocks. It’s a very important economic indicator that you need to monitor on a regular basis.

Consumer confidence is a very important measure of how the economy is doing and where it will go. This is especially true in the US and for the global economy. It’s important for the US because 70 percent of our GDP comes from domestic consumers. It’s important to the global economy because the rest of the world sells goods and services to us.

In other words, if consumers in the US don’t feel good about the economy as a whole or their own personal financial situation, than all industries will be affected. All the companies along the supply chain will be hurt and their stocks will take a hit.

Investment Strategy in Consumer Discretionary

You should watch out for this category of stocks for the foreseeable future. Consumer discretionary companies are those that sell goods that people don’t need but want. You current investment strategy should steer clear of these stocks unless you are trying to short them.

That is because the world economy is in jeopardy right now of going into another recession. At the very least, recovery has been slow and arduous. That means consumer and business confidence is going to be down. That also means they will be spending less money on discretionary products. You have to know the difference between needs and wants.

Consumer staples like food and energy will stay strong. These are things that people have to spend money on regardless of how they feel about their financial situation. You can’t prolong your buying of rice, but you can prolong your buying of a new TV or a car. You can just use your common sense to figure this one out.

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