This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Market Preview: The Undaunted Consumer

Stocks in this article: GOOGVZMSFTEBAYMLNXSPY^GSPC^IXIC^DJI

NEW YORK ( TheStreet) -- While the smart money is apparently worried about the fiscal cliff, the man on the street seems confident a solution will be reached.

Looking at recent data patterns, Capital Economics concluded the U.S. economy "appears to be developing a split personality" as consumers continue to spend fairly freely while businesses keep tapping the brakes.

"Households, seemingly oblivious to the scheduled jump in marginal tax rates that will reduce their after-tax income next year, are apparently growing in confidence and boosting expenditure," wrote Paul Ashworth, the firm's chief U.S. economist. "At the same time, alarmed by the looming fiscal cliff and the global slowdown, businesses appear to be slashing investment."

Ashworth pointed to the pick-up in retail sales growth in the third quarter and heavy demand for light motor vehicles, sales of which reached a four-year high in September, as evidence that Main Street is feeling pretty flush. Businesses, on the other hand, not so much.

"Consumer confidence surged to a five-year high in October, while the growth rate of orders for capital goods fell deep into negative territory in September, for the first time since the height of the recession in early 2009," he wrote. "One small comfort is that this divergence isn't showing up in the import figures. Imports of both capital and consumer goods slumped in the three months to August which, other things being equal, is good for GDP growth."

Ashworth expects the reality of the fiscal cliff to become more of an issue for consumers as 2012 winds down.

"The outlook for consumption and investment both depend crucially on whether the fiscal cliff is averted or not," the firm said. "The potential tax increases are likely to weigh more on consumption as we get closer to the year-end deadline. If, as we expect, a deal is eventually done to avert the fiscal cliff, however, then we could see a bounce-back in investment early in the new year, as pent up demand is released."

Last week's 2%-plus decline for all three major equity indices has been largely erased by this week's drive higher as earnings season has largely been less disastrous than expected so far and there continues to be bright spots in the economic data, such as Wednesday's positive reads on housing starts and builder permits.

If consumers can continue to lead the way and the fiscal cliff is avoided, the market could very well get the positive catalyst it needs to surge into the end of the year.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs