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It’s the question that’s dogging the markets — if America is now great again, as President Trump often states (or tweets), why does the retail industry continue to decline?

When then-candidate Donald Trump took home an unprecedented election victory last November, the markets responded vigorously. Several out of favor names, including those in the retail industry, took off like a bat outta hell. And whether individual Americans want to admit it or not, consumer sentiment jumped by 5% between November and January.

Clearly, Trump’s message about restoring American prosperity resonated with hard-working families whose jobs have been gutted by the Great Recession. And their collective voices appear to have been heard. According to the Bureau of Labor Statistics, the present unemployment rate is at 4.4%, a multi-year record low.

consumer sentiment

So in theory, both the economy and the markets are improving substantially. Some sectors have obviously recovered from their lulls. However, the biggest sore spot, in my opinion, is the retail industry. If people aren’t buying stuff, what good is any metric on the economy? After all, it’s the poor and middle class that push money velocity — the ultra-rich sit back and collect the transaction fees!

And why is it that retail is plummeting? Aside from the obvious winners like Amazon, the industry is hurting because the consumer is extremely selective of what they purchase. Consumer sentiment is just one indicator. I like hard numbers to verify that index, and we have plenty with which to work.

Rather than strictly focusing on unemployment figures, take a look at wage growth. Over the past five years, the average has increased by 12%. So far, so good. But wage growth doesn’t mean squat unless that extra money can be tucked away.

Unfortunately, we have living expenses. Those don’t just disappear because you want them to. And one of the biggest monthly liabilities for the younger generation is rent — this has gone up 18% in the trailing five years.

Let that sink in. While politicians prance around that the economy has improved, it has only improved on a top-line, “revenue” basis. On a profitability scale, the economy — at least, the consumer economy — is going down.

When we analyze the markets and other high-level financial topics, we have a tendency of only focusing on the obscure or granular details. But the most logical answers are actually low-hanging fruits. If we truly have recovered from the Great Recession, then our retail industry would be robust. There’s no such thing as a bull market with depressed consumers!

So while I’d like to pretend that one man in the White House can fix everything, the reality is far different.

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