You’ve probably heard the finance term “in the black.” It means that a business is doing well financially, because profits were traditionally written in black ink while debts and other losses were written in red.
“Black Friday”, the start of the holiday shopping season, is typically called that because it’s the turning point when retailers are able to take their accounts from red to black.
You have to imagine that a lot of retailers were especially looking forward to the 2022 holiday season following an extended period of pain because of the recession. Instead, that relief turned to pain after numbers came out for December retail sales. The numbers fell 1.1% month-to-month across a range of goods and shed a negative light on economic growth going into 2023.
It’s important to note that retail sales were up around 6% year-over-year, but a lot of those gains could have been driven by the inflation that took hold over that 12-month period.
Weakening demand and consumer sentiment that rough economic times could be here any day are causing belts to tighten, and that will cause companies to adjust their plans for 2023.
They will have to account for the fact that, even as inflation eases, consumers will prioritize necessities over discretionary purchases. These companies and industries live and die by consumer sentiment. The ones that will do well over these next few quarters are the ones that will be able to adjust their strategies to confront the challenges we’re sure to face over that time.
As far as the Federal Reserve is concerned, it’s committed to continuing to raise interest rates. Recent data, however, has made it so that the Fed will slow the pace at which those rates rise. We could also be looking at the beginnings of a conversation about whether or not it’s time to start thinking about pausing those increases.
It will still be some time before we have a clear picture about how everything is going to develop. In the meantime, as an investor, it’s up to you to take the steps you need to protect your wealth.
This is exactly what Nick Hodge’s Foundational Profits publication is all about.
It covers current market conditions and long-term trends to give readers the strategies they need to outperform the market in good times and bad.
His recent issues talk about the macro environments and trend shifts I discussed here, and you’ll find insights in every issue that have been helping readers make profits for the past decade.
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