December Data Reflects Sentiment Storm, But Sets Up For Downgrades and Positive Surprises

February 14, 5:00 pm EST

A big miss on retail sales this morning sent stocks sharply lower, initially.

This type of reaction presents a perfect opportunity to add at cheaper levels. Remember, this is old data, from December (delayed due to the government shutdown). And we know what was going on in December. Stocks were hammered. The government was heading toward a shutdown (which happened toward the end of the month). And the Fed raised rates right into it. It was a sentiment storm.

What is significantly correlated to sentiment? Retail sales.

Here’s a look at the dip in both …

The number this morning has already triggered downgrades in fourth quarter growth estimates.

The good news: This will also further drive down expectations for Q1 growth.

I say good news, because these sentiment driven indicators have a long history of short-term swings, and can bounce back very quickly. Remember, since December, we now have a near full retracement in stocks, a Fed on hold (and a more acommodative global central bank stance), and a somewhat more optimistic geopolitical outlook.

So, we’re setting up for positive surprises in the economic data for Q1. Positive surprises are fuel for stocks.

Join me here to get my curated portfolio of 20 stocks that I think can do multiples of what broader stocks do, coming out of this market correction environment.