I detest economic data released from the government, for two reasons. First, I can't see the face of the person creating the stuff. At least with publicly traded companies, I could head over to the investor relations page and read the bios of the top five executives (or watch YouTube clips of them on TV/listen to them on earnings call). Second, there is simply too much data being released in a given week, all of which confuses average (not sophisticated...they have information the average guys only dream of) investors.
I think the government should be trying to consolidate economic reports, and develop some form of new measurements on the economy.
Consider this from today's robust third quarter GDP report:
- The "second estimate" of third-quarter GDP was 3.9%. End result: 5%.
In fact, look how the GDP data trended, once again reaffirming how unreliable it is to investors.
Source: BEA
Given the notoriously unreliable government numbers, and robust 5% GDP figure that will be on the front page of local newspaper websites, you owe it to yourself to think if the report was truly valid. The best way to do that is take a look at the market.
Target and Wal-Mart vs. Major Averages
Real personal consumption expenditure increased 3.2% in the third quarter, compared with an increase of 2.5% in the second. I think this is believable in light of the move in Target (TGT) and Wal-Mart (WMT) shares into the holiday season. The market is suggesting retailers, spurred by consumers being in a better financial position, have had a stronger than expected holiday season. That ultimately bodes well for demand in the first quarter of 2015 across manufacturing and transportation -- thought FedEx (FDX) earnings were meh.
Source: Yahoo Finance
Transport Stocks
If retailers are enjoying a secretly better than expected holiday quarter, that means transport companies are doing alright. Hopefully they are able to pass on higher wages to attract drivers in 2015, which would help them to meet even more demand. The point here being we are getting a fuller picture on an economy that could do well, with interest rates hiked by 0.25 percentage points sometime in 2015.
Source: Yahoo Finance
Semiconductors
One of the reasons why I mentioned earlier this morning that Best Buy (BBY) remains a top pick of mine into 2015: the semis are telling me that is the way to go. The move in the Semiconductor ETF suggests solid re-ordering activity by manufacturers and retailers in the front part of 2015. Again, that confirms the otherwise wacky 5% GDP report.
Source: Yahoo Finance
Takeaway
If any one of these market indicators were lagging, well, then I would approach the mouth-watering GDP figure much more skeptically. But what we have been dealt today is yet another sign that being long the market in key growth sectors is smarter than being overweight defensive names or short the S&P 500.
At the time of publication, Brian Sozzi had no positions in any of the securities mentioned.