Dividends and Fund managers continue retreat from consumer stocks

In Washington, for 35 days they allowed 800,000 people to work without pay and 500,000 contractors not to be paid as there was a partial shutdown. President Trump and his Cabinet tried to justify the actions by suggesting the economy was still good and would continue to do well because the number of government workers represented a small fraction of the workforce. It might have been true, but during the shutdown consumer spending in general was slower although to be fair, it generally is slower after the Christmas season.

If you look to Wall Street, what are fund managers doing with consumer stocks? are they buying them or selling them? David Randall of Reuters called around to some fund managers and they were selling consumer stocks. Steve Chiavarone, a portfolio manager at Federated Investors said the market is treating the event as a hurricane, where you know there will be an economic impact but you try to discount any hit to the data because you know there will be some catch up.

Shawn Kravetz, Chief Investment Officer of Esplanade Capital said he expected consumer stocks such as Walmart and dollar store chains such as Dollar Tree to benefit as workers traded down to more value oriented chains. Life is about cash flow.

Eric Marshall of Hodges Capital Management said he is underweight in restaurant stocks because the combined government shutdown and slowing economic growth.

Linking to dividend paying stocks, life is often good until something changes, in this case it was a government shutdown which has no apparent result except to make people suffer. Governments seemingly have their own agenda rather than working with companies, but when you see government try to rationalize bad decisions, ask yourself would you invest in the sector or find alternatives?

There are more questions than answers, till the next time – to raising questions.

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