Why Are Consumer Stocks Doing So Well?

REPLAY VIDEO
Your next video will start in
Pause
  • Info

  • Comments

  • VIDEO TEXT

July 9 (Bloomberg) -- Weeden & Co. Chief Global Strategist Michael Purves discusses consumer stocks with Julie Hyman on Bloomberg Television's "Lunch Money." (Source: Bloomberg)

Purves to talk not just about chipotle but in summer stocks.

This is one of the groups that, counterintuitively, as does so well over the past years.

People don't have jobs.

The economy supposedly has been struggling.

And yet these these countries have been so, so well.

It is fantastic radio a few look back to 2008, one of the highest quality rallies, not only of the stocks going up a lot, but consolidations have been modest.

If you go long in one sector, this is the sector to have been in.

One is the rush for convenience, the second is clean eating, organic and all that.

We have seen that with whole foods, etc.

And of course, the custom-made dimension of that.

Those stocks have been growth stocks.

High pe class, but companies like amazon have also been high pe and have shorts.

Priceline, another one.

What is it about the u.s. consumer that has caused people -- why do we keep spending so much money?

[laughter] you just look at that chart, it is relentless.

We keep spending money and the sox keep going up and we have a premium price.

All related.

Part of it is related to secular themes on how every aspect of technology has made convenience that much more important.

But also, instead of -- it has been a defining feature of the u.s. economy for decades now and it is increasing.

It is a good thing we're spending all this money, the 70% of our gdp or it -- the 70% of our gdp.

For that matter would be problematic.

What happens now with this particular group?

It is hard to get a handle on the market when we see this company by company volatility.

But if you look at consumers as a group, and i am looking at what you mentioned here.

Chipotle valued at 42 times earnings right now.

Are people going to continue to pay these premium valuations, and are we going to continue to see as now the economy is supposed to be gaining a little traction -- are we going to continue to see rally in the stocks?

One of these tricky things where they are very difficult the short and you can make a lot of great arguments to sure these stocks fundamentally.

You can run cash analysis and forget the prices they are traded at now.

But let's face it, we are in a market heavily defined by momentum and there are algorithmic dynamics with the machines and all that.

The key is to watch for the early cell signals.

If some of the stocks you are in a continuing to rally and you are not seeing confirmation on the momentum side, those are good cell signals.

, not playing on the dips as has been happening the past several years?

You can, but in terms of getting out, look for the loss of momentum as you see in various technical factors.

Thanks, michael.

Of course, you are going to be with us for the rest of the hour as well.

This text has been automatically generated. It may not be 100% accurate.

Advertisement

BTV Channel Finder

Channel_finder_loader

ZIP is required for U.S. locations

Bloomberg Television in   change