Consumers Still Hanging On

Consumers have been struggling as lending stopped, foreclosures continued, and saving replaced spending. Even through all this, discretionaries led the pack in 2009. Looking forward into 2010, why should investors not continue to stick with them? As holiday sales impressed, there is no reason why consumer discretionaries cannot continue to help lead the market back to its highs.

Borrowing decreased for a 10th consecutive month as banks are still unwilling to lend and consumers unwilling to use plastic. No one would have expected discretionaries to perform so well with consumers not spending. As the economy rebounds and unemployment decreases, discretionaries are something to look for. With the large increase in valuation before spending even started to recover, this sector looked largely overvalued. This week's holiday sales numbers showed a reason to be optimistic.

Holiday sales and December sales were both up compared to last year. This should only be expected as last year we were in a recession and this year we are not. The overwhelming majority of retailers posted gains as inventory was cut and promotions ran rampant. We can only expect this to continue moving forward through recovery. Given the ability to increase sales during the strenuous holiday season, discretionaries are something to look at to make cash money in 2010.