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Why the Fed is making stores for the rich richer and low-income stores poorer: Strategist

Talking Numbers

Numbers for Tiffany & Co. was great this past holiday season. Not so for Sears and Kmart. One strategist blames it on Fed policy. Here's why.

For high-end retailer Tiffany & Co., the holidays were very happy indeed. For Sears Holding Corporation, the parent company of Sears and Kmart, the busiest shopping period of the year was miserable.

Tiffany saw its sales increase sales by 4% in the last two months of 2013. Except for Japan, Tiffany saw its sales up in every region. On the flip side is Sears, which watched its same-store sales drop by more than 9% for the last two months of 2013 while its sister company Kmart saw declines of nearly 6%.

According to Steve Cortes, founder of Veracruz TJM, the different results by these two companies had everything to do with the type of consumer each one caters to.

(Read: Tiffany maintains forecast despite strong U.S. holiday sales)

"I think that what we're seeing between Tiffany and Sears doesn't have a ton to do with those companies respectively," says Cortes. "Rather it's a macro reflection of quantitative easing."

Cortes is referring to the Federal Reserve Bank's monetary stimulus which had the central bank buying $85 billion of US Treasury and mortgage bonds per month over the past year alone. That kept bond prices up and, thus, interest rates down while adding dollars into the financial system. The Fed has pursued various forms of quantitative easing since the financial crisis began but is now planning to begin tapering it.

"Quantitative easing has been fantastic for the wealthy, for the owners of assets," says Cortes. "It's been anything but fantastic for lower and middle income folks who are being squeezed greatly by this quantitative easing policy."

Stores catering to middle and lower income consumers such as Family Dollar also saw disappointing sales, notes Cortes.

"I think you're seeing folks who are regular wage earners having a very hard time with oil that continues to hover near $100," says Cortes. "They're not benefiting from a rising stock market because, for the most part, they're not invested or, at least, not materially so. But, you have the opposite of that with Tiffany."

Cortes believes this trend will continue under incoming Fed Chair Janet Yellen. Yellen is perceived to be on the "dovish" side of the spectrum at the Fed and thus more open to continuing quantitative easing. For Cortes, that means more of the same.

(Read: Fed officials could ignore ugly jobs report—for now)

"I think you want to continue to favor high-end, high-priced retail stocks and avoid the opposite," says Cortes.

CNBC contributor Andrew Busch, editor and publisher of The Busch Update, the charts for Sears Holdings reflect a negative view of the stock. Busch notes that after hitting highs in the $80-range two years ago, the stock subsequently fell into a trading range of between $69 on the high-end and $38.50 on the low-end. The stock broke below the low-end on Friday when it fell 14% to the $36 range.

"Typically, when you see a stock break out of its range either to the upside or to the downside, that's not a good thing," says Busch. "I would say, sell Sears and sell until it really closes back above $38.50. Otherwise, it's really indicating to you from a technical basis it's got some weakness here. There's reason to sell. So, go ahead and do it."

To see more of Cortes on the fundamentals driving Tiffany and Sears – and to see Busch on Sears' chart – watch the video above.

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