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"Speeding arrow, sharp and narrow,
What a lot of fleeting matters you have spurned.
Several seasons with their treasons,
Wrap the babe in scarlet colors, call it your own.
Did he doubt or did he try? Answers aplenty in the bye and bye,
Talk about your plenty, talk about your ills,
One man gathers what another man spills."

--Grateful Dead, "St. Stephen"

A possibly important feature of this week's market has been the changing leadership, out of FANG and into the financial, industrial and retail sectors.

My view is that FANG is at or near a peak and that a number of factors will provide headwinds to additional strength in the financial and industrial sectors.

On the other hand, the much-maligned retail sector may be worthy of a trade to the upside over the near term.

FANG Defanged?

I have issued cautious analyses with regard to three of the four FANG stocks:

* Inc.  (AMZN) : Peak Amazon (Part Trois), Bipartisan Political Threat to Amazon May Be on the Horizon and Threat to Amazon May Be Coming Into Clearer Focus

* Netflix Inc.  (NFLX) : The Nuts or a Folding Hand?

* Alphabet Inc. (GOOGL) : Alphabet Soup!

Financial and Industrial Stocks' Strength Could Peter Out

My pessimism toward these sectors is based on the expectation of a decelerating rate of economic growth both in and outside the U.S. that will serve to keep interest rates lower for longer and disappoint the consensus for the fourth year in a row.

This notion is rooted in a 1-1/2-year low in the Citigroup Domestic Surprise Index. With "Peaks Everywhere" and soft data also rolling over, U.S. GDP and corporate profit growth also likely will be lower for longer.

This is also the still-ignored message of the bond market, with the 10-year U.S. note yield still at just 2.3% and the 2s/10s spread at only 93 basis points.

As to the non-U.S. markets, though talking heads are enthusiastic (aren't they always?) about European and other economies, high-frequency data is beginning to falter and is telling a different story. (Perhaps the recent weakness in the DAX is a forward indicator to this possibility). And, importantly, the sizable strength in the euro will dampen growth in the export-dependent European region.

Finally, many financial and industrial stocks (e.g., JPMorgan Chase & Co.  (JPM) , Caterpillar Inc.  (CAT) and 3M Co.  (MMM) ) have discounted the recent expression of optimism. Their valuations are now quite elevated.

The Retail Outlook

This week retail stocks have been upside leaders, even stronger than the financial and industrial indices. Yesterday I sold Dillard's Inc.  (DDS) for a 45% gain in only one month.

At the same time, Amazon has traded slightly lower; I am short the name. (Amazon is part of the Trifecta Stocks portfolio.)

Unlike financials and industrials, which are setting new highs, the setup for retail stocks appears better, with most stocks down large percentages over the last 12 months. Pessimism is high.

Here is what I think is happening to benefit the retail space:

* Investors in retail stocks, which have lagged the market badly, may be noticing activity in the sector.

    Nordstrom Inc.  is considering going private.

    Dillard's effectively is going private with an aggressive and active repurchase program.

    Barnes & Noble Inc.  now has an activist investor who thinks this troubled firm is worth 5 times its current price.

    Staples Inc.  is going private.

    * There are large market-cap differentials between the behemoth (Amazon) and all the rest of retail. Ergo, a slight diminution of interest in and diversion of investment dollars from Amazon can have an outsize impact on bricks-and-mortar retail stocks.

    * Amazon is beginning to attract regulatory scrutiny for its business practices. President Trump has been critical of the Amazon. And it is true that AMZN is less than vigilant about collecting sales tax from third-party sellers. This gives Amazon a price advantage versus old-school retailers. The president has commented on this. I doubt it helps that Amazon CEO Jeff Bezos owns The Washington Post, which along with the "failing New York Times" has been critical of the president. Revenge is clearly in the president's playbook.

    For the near term, betting on the retail underdogs may be a sound trading strategy.

    Given my market concerns, I am now only long (JWN) in retail. However, Walmart Stores Inc.  (WMT) , Macy's Inc.  (M) , Best Buy Co.  (BBY) , Kohl's Corp.  (KSS) , Target Corp.  (TGT) and Bed, Bath & Beyond Inc.  (BBBY) may be tradeable on the long side now.

    (This article originally appeared at 10:30 a.m. ET July 26 on Real Money, our premium site for active traders. Click here to get great columns like this from Jim Cramer, Doug Kass and other writers even earlier in the trading day.) 

    At the time of publication, Kass was long JWN.