It’s important to watch the economy and heed the warning signs for particular cyclical industries. When pocketbooks are squeezed, what is the first thing to go? Certain luxury goods, vacations, and dining out certainly are all on the list. Likewise, when people have cash to burn, where might they spend it? Perhaps in high-end retail, second homes, house improvements, or entertainment. Scour the news for signs of an improving economy (high economic growth rate, low unemployment) that signal a willingness by consumers to spend. Conversely, when consumer debt levels are high and there’s uncertainty about job security, it usually signals the end of a successful retail cycle. Happy investing!
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