By Gareth Soloway on April 23rd, 2010 12:46pm Eastern Time
A recovery on the economy from massive amounts of stimulus and market propping is still a recovery according to retailers like Polo Ralph Lauren Corporation (NYSE:RL), Bed Bath & Beyond Inc. (NASDAQ:BBBY), Urban Outfitters, Inc. (NASDAQ:URBN), Target Corporation (NYSE:TGT), The Gap Inc. (NYSE:GPS), Guess?, Inc. (NYSE:GES), and Nordstrom, Inc. (NYSE:JWN). After a brutal last couple years of consumer spending, it appears pent up demand is spilling over in a massive way. While this seems bullish, the question is, will it last?
These and other retailers are partying like it is 2007 according to their stock prices. Polo Ralph Lauren Corp. and Bed Bath & Beyond Inc. are at, near or above their 2007 highs. This may seem crazy to many out there considering government reported unemployment still hovers at 9.70% and real unemployment is near 18.00%. In 2007, unemployment was much, much lower.
To see these stock prices approach their 2007 highs or even eclipse them in the case of Bed Bath & Beyond Inc. is a wonder and a sign of just how much stimulus and pent up demand there was from the previous two plus years. As a Chief Market Strategist, I must look at all angles. With unemployment as high as it is, interest rates rising in the next couple years and pent up demand eventually slowing, can these stock prices be justified? The only saving grace for these retailers is competition. In the last few years, some competition has vanished and that has helped sales. Still, it is hard to believe that is enough to justify 2007 highs.
Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com
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