Recent high-frequency spending data from JPMorgan Chase and Bank of America reveals a significant slowdown in consumer activity since mid-November. This "very, very soft" trend suggests the holiday shopping season will likely disappoint, challenging expectations for strong growth. Investors should anticipate potential weakness in fourth-quarter earnings for companies in the retail, e-commerce, and consumer discretionary sectors. Consider re-evaluating or reducing exposure to consumer-focused stocks and ETFs like the Consumer Discretionary Select Sector SPDR Fund (XLY). The data points to a bearish outlook for the consumer sector heading into the new year.

Consumer Spending & Retail Sector

• The podcast discusses the outlook for holiday season spending, noting that while some analysts expected five plus percent growth, recent data suggests this is unlikely to happen.
• The speaker highlights a significant slowdown in consumer activity, pointing to proprietary data from two of the largest U.S. banks.
• The overall sentiment expressed is bearish for the consumer sector heading into the new year, as the data does not align with a "strong holiday season."

Takeaways

• Potential for Underperformance: The "very, very soft" spending data suggests that companies in the retail, e-commerce, and consumer discretionary sectors may disappoint on their fourth-quarter earnings and revenue.
• Re-evaluate Holdings: Investors with exposure to consumer-focused stocks should be aware of this potential weakness. The data implies that consumer strength may be waning, which could negatively impact stock prices in this sector.
• Look for Contradictory Data: The insights are based on data up to the point of the recording. A key action would be to monitor upcoming official retail sales reports and individual company earnings to see if this weak trend is confirmed.

JPMorgan Chase (JPM)

• JPMorgan Chase was not discussed as a direct investment but as a source of high-frequency economic data.
• The speaker specifically referenced the Chase card spending data, which provides a day-by-day comparison of spending this year versus last year.
• This data shows that since mid-November, the spending dynamics have been "very, very soft," indicating a clear slowdown in consumer activity.

Takeaways

• Data as an Economic Bellwether: The spending data from JPM's large customer base is presented as a key indicator of the health of the U.S. consumer.
• Leading Indicator for Retail: The weakness seen in Chase's data is a potential warning sign for the entire retail sector, as it captures a significant portion of overall household spending.

Bank of America (BAC)

• Similar to Chase, Bank of America was mentioned for its data insights rather than as an investment opportunity.
• The podcast refers to the Bank of America timely spending data, which is published in their "consumer checkpoint" report.
• This data is used to confirm the weak trends seen in the Chase data, with the speaker concluding that the combined reads from both banks look "pretty weak."

Takeaways

• Confirmation of a Trend: The fact that BAC's data aligns with JPM's data strengthens the argument that the consumer spending slowdown is a broad-based trend and not an anomaly in a single dataset.
• Informed Decision-Making: This highlights the value of using alternative data sources, like credit card spending reports from major banks, to get a more real-time pulse on the economy than official government reports, which are often delayed.