Is Consumer Discretionary Spending Under Threat?
The ebbs and flows of the market often reflect too much exuberance or too much pessimism at any given time. For contrarian investors with impeccable timing, this creates opportunity. But what about the current time; how do things look for consumer confidence in Singapore – and what, if any, implications does this have for stocks?
First off, we need the courage to go out on a limb here and kind of ignore the data. Why would we do that? Well, because everyone has access to the same data, so consumer confidence surveys for example, whilst useful, really aren’t going to help you to time the market to perfection. If they did, the investing game would be easy!
The Straits Times Index has enjoyed a pretty solid three year run and both investor and consumer confidence have been high. But 10 years on since the world financial crisis, and nine years on from most major indices’ low points, are we now seeing complacency creep in? The contrarians would say ‘yes’, pointing to myriad reasons and, as they say, the bear case always sounds the most intelligent.
But there are genuine reasons to be fearful among specific sectors. The world is rapidly evolving. Let’s take a straightforward area like dining out, for example. It’s getting easier and cheaper to dine in, instead. And dining in is growing in popularity. So, for lovers of Japanese food – and there are plenty of these in Singapore – it’s quick and easy to order sushi in via Deliveroo, for example. If this kind of trend continues, then it could be obvious bad news for a company like Singapore-listed Japan Foods Holding Ltd (JFOOD:SP Singapore) whose stock price has enjoyed a steady rise for the last two years.
Similarly, if you think retail is more or less dead other than its online format, then what’s the future for multi-store format retailers? And if you think the seemingly never-ending expansion in hotel resorts and gambling is a juggernaut about to hit a wall, then a company like Genting Singapore (G13:SP) could be in for a tumble.
These things are overall macro-judgment calls. Just remember, though, that markets (and individual stock prices) can climb a wall of fear. Remember, too, that stock markets’ inexorable overall direction is upwards, so timing the market falls along the way is not only difficult, but it’s also kind of betting against the house.
Those involved day to day in high finance often take enormous, but usually hedged, positions on the direction of individual markets – up or down. But for most of us mere mortals, buying excellent companies on temporary market weakness, then holding them for the long-term whilst re-investing dividends makes far more sense.
Trying to decipher overall consumer confidence is more or less impossible. By the time this has filtered to the market, it’s almost invariably already in the price. But pricing a real wobble in consumer confidence into your choices of stocks, and tempering your valuations accordingly, will certainly help you avoid disasters. And it should also help you time the market.