He alludes to some of the risks with translating these findings into hard investment decisions as what if, for example, a consumer finds greater uncertainty in improving fundamentals and saves more than they spend? And what about the spill-over effect from large parts of the economy – oil and metals, mining, industrials – feeling the pain that could negatively influence the consumer?
Sayers goes on to say: “As large swathes of the economy – energy, materials, industrials and utilities – are buffeted by low commodity prices and a global decline in capital expenditure, it may take years of capital scarcity to restore the capital and cost discipline necessary to bring equilibrium to supply and demand. While this is going on, it is crucial that the service side of the economy holds up if a global recession is to be avoided later in the year.”
How likely?
And how likely is the consumer sector likely to hold up and save us from a global recession by the end of 2016?
Again he focuses on the positives, saying that all the reasons consumer spending is giving rise to investment opportunities in the retail, leisure etc. sectors now are more than robust enough to continue to drive growth in 2016.
Given recent – and likely ongoing – market volatility, greater pressure on the Fed’s second interest rate move, uncertainty around the UK’s relationship with its biggest trading partner, Europe, China’s weakening economic figures etc. etc. etc., as Brad Sorensen, the managing director of market and sector analysis at Charles Schwab, says: “Having a market-weight position in the staples sector seems prudent in order to provide some stability to an investment portfolio.”
