As the US fund managers have been expecting an imminent escalation of sluggish growth, they remained selective while choosing consumer stocks as lofty valuations, a basket of worse-than-anticipated earnings estimate and hammered out consumer confidence have been keeping them on guards in order to cushion up the investment.
Although a low US unemployment despite global economic slowdown and a 35-day long federal government shutdown, alongside growing wages could have pointed to a healthy consumer stocks index, yet an unnerving worry surrounding the fate of US-China trade talk and local US politics had been dampening investors’ sentiment and weighing on consumer stocks.
Citing data from Refinitive as of Friday (February the 8th) US morning trading session, the Wall Street was expecting a 14.7 percent growth in the fourth quarter earnings for S&P 500 consumer index, which was below the 17.8 percent consensus from October 2018, at the beginning of Q4, 2018.
In particular, for the consumer staples, the earnings of the fourth quarter were expected to grow 4.2 percent, which was down from the 6.7 percent consensus forecasted at the beginning of Q4, 2018. Meanwhile, the S&P benchmark is expected to post a 0.1 percent decline in growth from a projected fourth-quarter earnings’ growth of 16.8 percent.
Following the US federal government shutdown, the US consumer confidence was cast away to a 1 and ½ year low and turmoil in the financial markets added further worries and left the households nervous.
While it is no wonder the investor funds would be avoiding consumer stocks, a chief investment officer at the US Bank Wealth Management in Minneapolis, Eric Freedman said, “Our thoughts on the global consumer is that the marginal data points coming in are more negative than positive.