Appliances, Tacos Trump GDP as Economic Indicators
No need to wait for Friday’s GDP report to get the definitive read on the economy, just look at the earnings results from Whirlpool, Chipotle and Ralph Lauren, say top traders and investors.
“The bears contend that the gains are temporary because the market is being buoyed by the Federal Reserve Board, which is making money available, and by the government’s stimulus,” wrote Laszlo Birinyi, legendary trader and operator of Birinyi Associates, in a note to clients. “Perhaps, but we thought that money was going to states and local governments to upgrade roads and not buy guacamole, tacos or Polo Shirts.”
Birinyi cites recent gains in Chipotle Mexican Grill and Ralph Lauren as proof that investors should be listening more to the Tape than their economists. Chipotle shares are up more than 20 percent and Ralph Lauren is up 10 in one month. Chipotle said last week that first quarter sales jumped 15 percent. Ralph Lauren reports earnings next week.
The government is expected to say tomorrow that first quarter GDP increased 3.3 percent in the first quarter, according to consensus estimates from economists compiled by Dow Jones.
But Birinyi believes economists, the media, and many of the market pundits out there are still being too pessimistic about this economy. Birinyi Associates expects the S&P 500 to gain about another 10 percent this year as this group finally becomes convinced.
Whirlpool said this week that first quarter sales surged 20 percent and also raised its forecast for the year. Shares of the Maytag maker are up 22 percent in the last month.
“You get a complete economic look-through with a Whirlpool,” said Gary Kaminsky, former money manager for Neuberger Berman and now a contributing editor at CNBC. “People don’t upgrade appliances unless the economy is improving.”
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