Retail has been hotter than the sun over the last two months. Many stocks continue to hit new all time highs ahead of the biggest shopping day of the year, Black Friday. Retailers and Wall Street continue to be extremely optimistic after the Federal Reserve has pumped trillions of Dollars into the economic system, artificially inflating asset prices to fool the average American into feeling wealthy again. Just today, Amazon.com, Inc. (NASDAQ:AMZN) ran to a new all time high at $177.39. Coach, Inc. (NYSE:COH) and also made a new all time high and Tiffany & Co. (NYSE:TIF) reported earnings that were better than Wall Street anticipated, shooting it to a new all time high.
As almost every retail stock soars to new or all time highs, the question must be asked, is this all hype? Being a Chief Market Strategist, I pride myself on knowing when a stock has factored in amazing earnings and sales. At this point, these retailers would have to have sales that would blow away expectations in a mind blowing fashion. This is not realistic even in the most optimistic scenario. The reward going forward, after Black Friday is now to the downside. This is not to say they cannot inch higher in the short run, but unless the Federal Reserve literally pumps money into these retailers first hand themselves, I do not see much more upside.
Based on earnings, growth and actual sales, a majority of retailers will not be able to live up to the hype of expected sales based on their current valuations. In addition, after the holiday season is over, where are sales going to come from? This is much like the markets actions after the announcement on quantitative easing number two. The markets ran up into it, but after they were left looking for the next catalyst. Look for a pull black starting after Black Friday as institutions start taking money off the table and selling to the retail investor.
Chief Market Strategist