Earning More, Spending MoreMuch was made during both the bubble and its bursting of the so-called wealth effect, the alleged propensity of people to spend more when they have more money and to spend less after they get clobbered. One way of tracking this profound insight indirectly is to compare the relative performances of the S&P Retail Index and the broad market as represented by the Wilshire 5000.
|Where's the Wealth Effect? |
Retail outpaces the broad market
The December EffectIs all of the fretting over holiday sales justified by its impact on the market? Let's take a look at the weekly retail sales index produced by Bank of Tokyo-Mitsubishi (and who better to divine the secrets of the American consumer's heart than a Japanese bank?) and compare it with both the broad market and the S&P retail measure. This index is seasonally adjusted to account for the obvious surge between Thanksgiving and New Year's Day. The chart below strips out the nonholiday weeks to present simply the seasonally adjusted year-over-year sales increases for the Thanksgiving-New Year's period. The average year-over-year weekly increase of 4.075% is superimposed.
|Try to Remember the Kind of December |
Retail and the broad market appear unrelated