Not only are investors dealing with financial concerns, which are driving selling capitulation and forcing major stock indices to new multi-year lows, but now we hear that retailers continue to struggle in September. Consumer spending took another step back, as the retail sales data for September were weak and confirmed the belief that consumers are scaling back on their spending during times of uncertainty. Preliminary data showed that seven retailers missed on same-store sales for stores opened a year or more with three above estimates, according to Thomson Reuters.
While the retail sector is risky, we are seeing amazing valuations in retail stocks appear given the selling. If you have a long-term view and do not mind short-term volatility, you may want to take a look at some retail stocks that have a strong history and a good potential of bouncing back when consumers start to spend again.
Clearly, these are not good times to be invested in the stock market, as the degree of selling has been intense and, in our view, unjustified in some cases. But investors need to be rational and avoid selling into a down day. You should be keeping track of stocks you like and looking for buying opportunities on market dips. If the concerted efforts to stabilize the global economies work, we could see a massive buying of stocks and strong gains for those that accumulated on dips. Of course, this is risky, as stocks remain vulnerable to the downside.
The uncertainties out there are valid and make more downside moves in stocks likely in the near term and heading into 2009, which is turning out to be full of uncertainty. We are clearly nervous, as a market bottom has yet to be established and this is where the risk is. You’ve got to wonder about the current selling capitulation and the increasingly attractive valuation of stocks.