“`html

U.S. Retail Sales Outshine Expectations, Signaling Strong Consumer Resilience

If there’s a lesson from my 47 years in the market, it’s to never underestimate the strength of the U.S. consumer. The latest retail sales report, released Thursday, reinforces this belief.

In today’s Market 360, we’ll explore the key points from the report. We’ll assess its implications for the economy and the potential for interest rate cuts in the future. Additionally, I’ll introduce you to a set of stocks that could benefit significantly from declining interest rates, potentially offering returns of 100% or more within the next 12-24 months.

Strong Retail Sales Indicate Consumer Spending Is Robust

The September retail sales data revealed broad-based growth, exceeding economists’ forecasts.

Specifically, retail sales increased by 0.4%, outpacing the expected 0.3% rise and showing significant improvement from August’s 0.1% increase.

Earlier this week, I mentioned to my premium readers that I was curious if consumers would channel savings from declining gasoline prices into other purchases. It appears they did just that.

When removing autos and gas stations from the equation, sales rose by 0.7% for the month and 3.7% year-over-year. Economists had only anticipated a modest 0.1% rise, making this result noteworthy.

The details reveal that sales increased in 10 out of 13 categories monitored. Key highlights include:

• Annual sales at miscellaneous retailers (such as florists and pet shops) rose 7.9%
• Non-store retail sales grew by 7.1% year-over-year
• Food and beverage sales increased by 3.7% over the past year

Consumer spending constitutes about two-thirds of the GDP, which is why traders focus on the “retail sales control group.” This metric excludes categories like car sales, gas, and building materials, providing clearer insight.

For the three-month period ending in September, control group sales rose at an annualized rate of 6.4%. Consequently, the Atlanta Federal Reserve forecasts a 3.6% increase in personal consumption for the third quarter, marking the year’s most robust pace.

Notably, current inflation data shows a trend toward moderation. While the job market has shown signs of softening, there are no immediate concerns. Coupled with strong consumer spending, this points towards a likely 0.25% key rate cut at the upcoming November Federal Open Market Committee (FOMC) meeting.

Small-Cap Stocks Set to Benefit from Lower Rates

A climate of declining interest rates often bodes well for stocks. However, small-cap stocks stand out as particularly well-positioned to thrive.

As noted in a previous Market 360, smaller companies typically face higher debt levels than their larger counterparts. Thus, lower interest rates provide a significant advantage.

This year has shown a stark divide in market performance, with larger-cap stocks greatly outpacing smaller ones since spring 2023. This is visually represented in the performance comparison between the SPDR S&P 500 ETF (SPY) and the iShares Russell 2000 ETF (IWM).

As interest rates decline, I anticipate this performance gap to close. In fact, the small-cap rally seems to have already started.

Recently, the small-cap Russell 2000 has outperformed the S&P 500, recording a 4.5% gain compared to the S&P’s 2.8%. Over the same two-week period, the Dow rose 2.2%, while the NASDAQ increased by 3%.

What’s particularly exciting is that this could be just the beginning. We are entering a period often characterized by an “early January effect.” Historically, when this occurs, it leads to a more substantial rally in January.

I remain quite optimistic about the market’s direction.

Factors contributing to a bullish sentiment surrounding small-cap stocks include the upcoming presidential election, just weeks away. Both candidates are actively campaigning, effectively boosting consumer confidence. This momentum is likely to carry through to the election on November 5.

Additionally, we’ve entered the third-quarter earnings season, with early results exceeding analyst expectations. FactSet predicts that the S&P 500 could achieve earnings growth well beyond the current estimate of 3.4%. They anticipate a wave of better-than-expected results could drive the S&P 500’s average earnings growth rate toward nearly 10%.

An Opportunity for Significant Returns?

I have a keen focus on numbers, and my analysis shows that companies with solid sales and earnings growth consistently outperform. As small-cap firms generally have more growth potential, identifying a few fundamentally strong companies now could yield impressive returns in this market.

My colleague Jason Bodner shares this perspective and advises readers to brace for what could be an exciting run for small-cap stocks.

“`

Investors Brace for Market Surge Thanks to Fed’s Actions

Expectations Rise for Small-Cap Stocks Amid Economic Changes

Analysts are optimistic about market movements due to falling interest rates, controlled inflation, and key seasonal trends linked to the election year. They anticipate a significant market boost as we head into the next year.

Particularly, small-cap stocks are expected to benefit from this surge. Jason, a well-regarded analyst, describes the current environment as a “Retirement Accelerator Window.” This phenomenon gives investors a unique opportunity to significantly advance their retirement plans.

Historically, these windows have opened only three times in the last 35 years and have been responsible for impressive gains of 117%, 250%, and even 514% based on extensive research.

Interestingly, looking through Jason’s findings, some of my best investment decisions have occurred during these Retirement Accelerator Windows. Our review revealed over 40 instances of triple and quadruple-digit returns achieved during such periods.

This represents a considerable wealth-building opportunity for investors. Jason has shared his insights with me over the years, and I’ve thoroughly analyzed his research. It is crucial not to overlook this chance, which is why Jason recently produced a new broadcast explaining the Retirement Accelerator Window in detail. He also reveals his top investment choice, promising potential for substantial gains.

Click here to watch the broadcast now.

Sincerely,

Source: InvestorPlace unless otherwise noted

Louis Navellier

Editor, Market 360