Consumer Discretionary: An Optimistic Sector

Consumer discretionaries, mainly the retail industry, reported same store sales last week. Many same store sales were down as July turned out to be a disappointing month for retailers. You would think that these stocks would have been down on the disappointing news, but most shot up for the day. Remember when I said stock prices depend on the outlook during earnings season? Well, stock prices shot up when these retailers raised outlooks for the year. This also shows improved optimism for the overall economy.

Consumer discretionary stocks will be one of the top sectors coming out of the recession. We have seen lots of gains already and still some of these stocks are undervalued. One of the main reasons that this sector was down in sales was the fact that the consumer has not starting spending yet. We have to wait for the consumer to come around before we see these sales increase. But that doesn't mean we have to wait to buy these stocks. It will get easier to beat YOY numbers as we reach last year's worst quarters. Stocks will soar as they are able to handily beat these numbers and even some estimates. It's never too early to be making cash money. Wait for pullback and then load up on consumer discretionary.