Wentz Weekly: Holiday Sales Stronger Than Expected

Wentz Weekly Insights
Holiday Sales Post Stronger Than Expected Growth

We wish everyone a Happy, Healthy, and Prosperous New Year!

It was a very quiet week last week, one that saw no notable economic data, corporate events, earnings, Fed comments, or political news. In fact, the number of shares traded on the New York Stock Exchange was about 30% less than this year’s average. With no news to trade on, the path of least resistance for stocks continues to be to the upside with the S&P 500 finishing 0.67% higher last week.

Meanwhile, the bond market has seen recent weakness intensify. Longer dated yields moved higher last week and the average long-term bond now has a negative performance this year. The index of Treasury bonds with 20+ year maturities has lost 8.3% so far this year. That compares with the middle of the curve, Treasuries maturing 3-7 years, with a gain of 1.4%, while the short end of the curve, 0-3 months, is up 5.2%.

The reason is the yield curve has steepened – this happens when yields on shorter dated bonds fall or hold steady, while yields on longer dated bonds rise. Remember when yields increase, bond prices decline. So far this year the Fed has cut rates by 1.00%, benefiting the short end of the yield curve, while signaling inflation has remained higher than previously thought, pressuring the longer end of the curve.

Turning back to the market, stocks are on pace for the second year in a row of seeing 20%+ gains. Much of the strength has been due to a rebound in earnings along with the resiliency of the US consumer. This year’s holiday sales is a good example of that.

As we wrote about several weeks ago, Black Friday weekend shopping sales growth ended up being better than expected with a 3.5% increase from last year’s sales. New data was recently released on the full holiday shopping period – the period from November 1 to Christmas day. Visa said its Retail Spending Monitor data showed holiday spending this year increased 4.8% and was driven by much stronger than expected in-store shopping. In person sales increased 4.1% and made up 77% of all sales, while online sales rose 7.1%.

Separately, Mastercard’s SpendingSpulse data shows holiday spending increased 3.8%, and an interesting fact, the last five days of the holiday season made up 10% of all holiday sales. It said there was a “search for value as can be seen by concentrated e-commerce spending during the biggest promotional periods.” Some gadgets that won this holiday included the Meta Quest VR Headset, fragrance/skincare products, Apple AirTags, and of course apparel.

Not only did consumer spending during the holiday set a new record—other indicators show the strength of the consumer. For example, as Raymond James noted, TSA reported that a record 3.1 million air travelers were screen the Sunday after Thanksgiving, the largest single day of air traffic on record, with overall travel this year higher than last. In addition, moviegoers spent an estimated $420 million at the box office over the five day Thanksgiving weekend — a new record for that period.

Stocks are now in what is considered the strongest part of the year. The final five trading days of the year and first two trading days of the new year have historically produced returns of 1.4% with a 78% win rate. That is compared to any other 7-day period where the average return is 0.25% and just a 57% win rate. This occurrence is referred to as the Santa Claus Rally. The period got off to a strong start on Christmas Eve with a 1.1% gain, before giving up all those gains Thursday and Friday.

The week ahead will be another quiet one, and as of this writing early Monday morning, stocks look like they will be starting the week on a rough note.

Week in Review:

It was a quiet week with trading volume very low. The major stock indexes saw no major news and finished with strength in technology, energy, and healthcare sectors with the major indexes finishing as follows: Nasdaq +0.76%, S&P 500 +0.67%, Dow +0.35%, and Russell 2000 +0.10%. Treasury yields were higher mostly on the longer end of the curve – the 2-year yield up one basis point to 4.33% while the 10-year yield was up 11 basis points to 4.63%. The dollar increased for the 12th time of the past 13 weeks, mostly over the expectation of a more hawkish Fed, with the dollar index increasing 0.4% last week. Gold fell 0.5%, the 4th decline in the past five weeks, and bitcoin fell 3.7%. Crude oil rose 1.6% on little news.

Recent Economic Data

• New Home Sales: New home sales increased 5.9% in November to a seasonally adjusted annualized pace of 664,000 new homes. This was 8.7% above the pace from a year ago. The pace of new home sales remains at the low end of its two year range. The average sales price of a new home was $429,600, 6.3% lower than a year ago. As has been the trend over the past year, the number of new homes on the market has steadily increased, with supply up 9% from a year ago to 490,000 homes, due all to completed homes on the market (versus unconstructed homes or those currently under construction).

• Durable Goods Orders: Orders for manufactured durable goods, a direct input to factory orders and GDP, declined 1.1% in November for the third decline in the past three months, worse than the 0.2% decline expected. The decline was due somewhat to a 2.9% decline in transportation because of aircraft orders, but still down 0.1% excluding transportation due to declines across several categories. The core reading, orders for nondefense core capital goods excluding aircraft rose a solid 0.7% with shipments up 0.5%. That is a good sign as it is an input to GDP.

• Consumer Confidence Index: The consumer confidence index compiled by the Conference Board declined 8.1 points in December to 104.7, a small pullback in confidence after a strong increase the past couple months. The present situations index fell 1.2 points to 140.2, and the expectations index saw a large drop falling 12.6 points to 81.1 and just above the 80 level that historically signals a recession ahead.

• Jobless Claims: The number of jobless claims the week ended December 21 was 219,000, a slight decline from the week prior, with the four-week average up only slightly. The number of continuing claims rose 46,000 to 1,910 million, the highest level since November 2021. The four-week average of continuing claims increased slightly to 1.881 million.

• Money Supply: The money supply (the amount of cash, deposit at banks, and money market balances) fell for 18 consecutive months through the end of 2023 but now has risen for 13 consecutive months, which may explain the recent bounce back in inflation. Money supply increased another 0.6% in November, or $135.7 billion, the fastest monthly increase since December 2021. Money supply is up $771.80 billion, or 3.7% over the past year and just 1.3% below the all-time high from April 2022.

Company News

• Google: Google has commented on the Department of Justice case against the company’s anticompetitive suit and its efforts to force it to sell its Chrome browser, saying that would be “extreme.” It offered a remedy of giving browser companies the freedom to deal with whatever search engine they believe is best for users.

• Walmart: Walmart shares moved 2.1% lower last Monday after the Consumer Financial Protection Bureau said it is suing the company and Branch Messenger for allegedly forcing delivery drivers to use costly deposit accounts, costing drivers more than $10 million in junk fees, in order to get paid and deceived workers on how they could access their earnings.

• Honda/Nissan: Honda and Nissan confirmed their plans to merge and have confirm plans to sign an M&A agreement by June 2025 with a goal of completing the merger by August 2026 in what would create the third largest automaker. Mitsubishi, who is 24.5% owned by Nissan, may also participate in the deal, planning to make a decision by end of January. What drove merger conversations was competitive pressures from the rise in the Chinese EV industry and US hybrid industry.

• Nordstrom: Nordstrom said it has agreed to be taken private by the Nordstrom family and the Mexican department store company El Puerto de Liverpool in an all-cash deal valuing at $6.25 billion.

• American Airlines: American Airlines had to issue a ground stop on all US flights on the morning of Christmas Eve due to a technical issue in the airline’s flight operating system. It does not appear the technical issues caused an increase in flight cancellations though, aviation data provider Cirium said only 19 flights were cancelled, in line with the typical 1% rate. However, delays were significant with only about one-third of the flights departing on time by the afternoon.

• Netflix: The two NFL Christmas Day games averaged a total of 24.2 million viewers with viewership peaking during the Beyoncé halftime show at 27 million viewers. Netflix made new records for viewership of any NFL game that was streamed. These stats are provided from Nielsen, Netflix will release its own data next week.

Other News:

• Impeached: Political turmoil in South Korea continues after lawmakers voted to impeach its acting President Han Duck-soo which comes just two weeks after they voted to impeach President Yoon Suk Yeol after he initiated Martial Law on December 3.

• TikTok Ban: Trump has asked the Supreme Court to put a pause on its implementation of a new law that would ban the video sharing social media app TikTok. He says he would like to have time after taking office to come to what he called a political resolution on the situation. The law is planned to become effective on January 19, which would ban the app in the US unless the parent company, ByteDance, sold it to an American company.

WFG News

WFG Closed

Please note Wentz Financial Group will be open all day on New Year Eve and markets will close at 4:00 pm as usual. Wentz Financial Group and markets are however closed on Wednesday in observance of New Year’s Day.

Markets Closed January 9

Please also note markets will be closed on Thursday January 9^th in observance of a national day of mourning for former President Jimmy Carter. It has been a long standing American tradition where financial institutions close following the death of a president.

2025 Contribution Limits

A reminder as we start the new year, contribution limits on several retirement account will be increased for 2025. Here is a quick recap on limits for calendar year 2025:

• 401k/403b/457/ Thrift Savings Plans:
  • $23,500 for those under 50 years old.
  • $31,000 for those ages 50-59 and 64 and above.
  • Under a change made in SECURE 2.0 Act and effective January 1, 2025, a higher catch-up contribution limit of $11,250 applies for employees aged 60 to 63 for a total of $34,750.
• IRAs (both Traditional and Roth):
  • $7,000 for those under 50.
  • $8,000 for those over the age of 50.
• Simple IRA:
  • $16,500 for those under 50.
  • $20,000 for those ages 50-59 and 64 and above.
  • $21,750 for those between the ages of 60-63.
• HSA (Health Savings Account): $3,300.