Retail stocks have been a tear since the March lows. Conventional wisdom in the financial media is that leaner inventories combined with firmer demand than anticipated will lead to a good holiday season for retailers.
I am skeptical on the latter point. Consumer confidence data has been trending down, which is not part of the bullish script. Housing and employment are nagging problems. Consumers are dubious on the sustainability of the recovery. One tool I use for consumer research is Google Insights — you can track trends in search volume by topic, like, for instance, Neiman Marcus or Kmart or Sports Authority.
In each of those instances and in many others I ran, searches in October and early November in 2009 were less frequent than in 2008. This is healthy happy bullish 2009 versus Lehman is melting, TARP is coming the world may end 2008. Will search volumes predict a weaker than expected Black Friday and holiday selling season? I don't know, but if they do, retail stocks should see some air come out. Should does not mean will in the environment. But one catalyst for a leg down is weaker than expected sales in mainstream retailers.