Bob Doll: Equities Appear More Attractive than Other Asset Classes | Nuveen

From Bob Doll’s weekly newsletter:

The strong patch of summer U.S. economic data may have ended. Following weak Institute for Supply Management readings in previous weeks, August retail sales declined 0.3%. This marks the first pullback since March, and bears watching for a broader downtrend into September…..

Corporate earnings expectations are climbing slowly. Following a modest second quarter improvement, analyst expectations for future quarters have climbed in recent weeks…..

Equities may continue to climb in 2016, based on historical trends. Strategy group Fundstrat shows that since 1940, when stock prices increased more than 5% by mid-September, 87% of the time they rallied further in the last three-and-a-half months of the year. As of Friday’s close on September 16, the S&P 500 Index is up 6.3%….

As you can see from Bob’s commentary, there seems to be a divergence between economic data (retail sales in this case) and technicals which tend to be more focused on the earnings expectations. I have seen something similar.

Retail sales have fallen in July/August but of greater concern is the longer-term down-trend. Continued growth below core CPI would warn of a contraction in real terms.

Retail Sales ex Motor Vehicles & Parts

Light Vehicle Sales are also below trend, reinforcing the down-turn in consumer outlook.

Light Vehicle Sales

The decline in sales is reinforced by the decline in growth of average weekly earnings (all employees).

Weekly Earnings - All Employees

Technicals, on the other hand, remain reasonably strong for the present. Until declining sales impact on corporate earnings.

Source: Weekly Investment Commentary from Bob Doll | Nuveen