The Holiday Season Has Begin

In September we began to focus on how the markets would ultimately turn its attention to the weak holiday sales that were coming. It is now December and it is still all about The Economy. Black Friday appears to have shown sales increases from last year in the range of 3% to 7%. While on the surface that is a good sign, in reality the profit picture must be bleak. Shoppers came out in droves to find the bargains on Friday and they did. Huge discounting occurred at most stores and if an item didn't have a huge reduction in price, it didn't sell.

The bulk of the buying this weekend was done on Friday; and Saturday may represent the weak retail environment we can expect for the rest of the Christmas season. It may also lead to merchants cutting prices even further. It doesn't really matter as it is clear that margins will be lower and profits will be awful. Has the market discounted these expectations enough? Last week stocks exploded on the upside for five days so we can expect somewhat of a reversal to start off this week. As stores start reporting their holiday results, the market will evaluate them. We think the bear market rally last week will ultimately come back down to life until it is clear that the economy will bottom in the foreseeable future. We continue to be cautious and will buy quality stocks as the market settles down to more realistic levels.