Beware The Annual Christmas Warning

Business Week reports:

There are plenty of reasons to be nervous heading into this holiday shopping season if you’re a retailer. Consumer confidence fell in October for the third month in a row. Income growth is sluggish. Energy prices are soaring. No surprise, then, that the winter gift-buying season, when retailers traditionally book most of their profit for the year, is looking less than jolly. Sales at stores open at least a year will increase a modest 3.5% in November and December, down from 4% last year and well below the 5%-plus growth rates of the late ’90s, estimates the International Council of Shopping Centers.

Now, can you guess when Business Week reported that? You would be forgiven for mistaking it as current news, but the date was November 8, 2004.

I can’t remember a holiday season that was rung in with good cheer in the financial media. It’s always a story about America’s strapped consumer finally reaching the end of his or her spending ability for the same list of reasons. Confidence is low. Inflation, often from energy, is high and that’s mopping up discretionary dollars. Incomes are down.

What happened after that dismal prediction in November 2004? The Dow gained 4.9% and the Nasdaq gained 6.7% by year-end, and Business Week reported on January 10, 2005:

The momentum continued as 2004 ended. The Conference Board reported that its index of consumer confidence jumped almost 10 points in December to the highest level in five months. Monthly data through November and holiday sales reports suggest real consumer spending grew at an annual rate of 3% to 4% in the fourth quarter. Strong buying just before and right after Christmas also helped retailers’ fortunes.

Here at The Kelly Letter, we are keenly aware of seasonal trends and market history. You should be, too. Don’t let what others believe to be “new” headlines scare you away from profits.

Remember this simple fact: news is usually frightening, yet the market usually rises.

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