Stocks Climb A ‘Wall Of Worry,’ Though Humpty-Dumpty Investors Can Fall Off The Wall

Macy’s, JC Penney, Sears. Does anyone seriously believe that these corporations will thrive in the years ahead? They’re far more likely to go belly up than to turn things around.

Many investors seem unfazed by the probability that Amazon (AMZN) will terminate traditional retail. They see it as an opportunity to invest more in the stock shares of the wildly overvalued e-tailer. What they’re neglecting, however, are the people that brick-n-mortar companies employ. There are roughly 400,000 at these three “dead-in-the-water” businesses alone.

It follows that I am not quick to dismiss the struggles of department stores, let alone disregard the decimation of mall shops like Foot Locker (FL), apparel producers like Under Armour (UAA) or sporting goods giants like Dick’s Sporting Goods (DKS). There is zero chance that millions of displaced employees across the retail landscape will find a ‘Prime’ job should Amazon be the sole survivor.

The S&P 500 SPDR Retail Trust (XRT) is currently retesting lows set in January of 2016. At that time, the European Central Bank (ECB) and the Bank of Japan (BOJ) announced record levels of electronic money creation to bolster floundering financial markets. The Federal Reserve also played its part in the stimulus game by shifting from a 4-rate hike stance down to a single rate hike stance.

Here in August of 2017, however, global central banks are attempting to ween investors off of the monetary policy heroin. The Fed even expressed an intention to begin a process of reducing assets on its $4.5 trillion balance sheet.

Unfortunately, old school retailers are not the only ones that may falter should the world’s central banks significantly tighten the reins on easy credit. Few sectors responded as brilliantly to global liquidity injections in January of 2016 as the energy sector. Now? The Energy Select Sector SPDR (XLE) is back below its 200-day moving average as well as logging 52-week lows.