According to the Conference Board, as indicated by the charts below, holiday spending both on a nominal as well as an inflation-adjusted basis is expected to rise this year. In our opinion, this is a result of a relatively optimistic consumer, low unemployment, slowing inflation and a strong labor market.
As the blue areas of the charts illustrate, consumers are spending a larger percentage of their holiday budget on “non-gift” or experiences as Americans embrace the “You Only Live Once” (YOLO) attitude. This would include travel and live entertainment.What does this all mean for the investor? We believe that at least for the time being it is an affirmation of a relatively healthy consumer, especially those with middle to upper-middle incomes. As long as the consumer remains strong, we believe this will set a floor in the stock market for the time being. Although valuations have recently become stretched, a healthy consumer and stable inflation in the 2-3% range will continue to be supportive of the overall stock market.
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