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October retail sales ‘have to be taken with a grain of salt': Clearnomics CEO

U.S. retail sales climbed 0.3% in October at the slowest pace in six months. James Liu, Clearnomics Founder & CEO joins Yahoo Finance Live to weigh in.

Video Transcript

ZACH GUZMAN: For more on what we're seeing play out, I want to bring on our next guest here, that would be James Liu, the CEO and founder of Clearnomics joins us now. James, it's good to be chatting with you. Let's start off with the update we got on the economic front here in terms of the reading on retail sales, because that number came in a little bit weaker than expected. It slowed in terms of the pace that we've seen, slowest in the last six months overall, arising just 0.3% from a month ago. So what did you make of that number, and what does it say about where we're at now in this recovery?

JAMES LIU: Excited to chat with you. Well, the retail sales number, I think, has to be taken with a grain of salt in the context of everything that's happened in the last six months. Last month, it jumped up by 1.9%. And so this reading that we saw today is a little bit weaker than what we had expected. But that's in the context of retail sales having bounced back tremendously after the lockdowns were lifted, you know, at the beginning of the summer.

And so, ultimately, retail sales is roughly, you know, back in par and in line with what you had before the shutdowns and pre-COVID. And so it's this tremendous recovery that we've seen in the overall economy. So it's a little bit weaker than expected, but overall, the fact that individuals are spending, the fact that people are ordering stuff online rather than maybe in person, that all shows that the economy can strike a better balance between safety measures and continuing to spend and keep things propped up as we go over the next several months from now.

- Yeah, and we saw that play out with Walmart's quarterly report out this morning. They talked about e-commerce sales seeing a big jump, a 79% gain there. At the same time, they saw store traffic down for a second consecutive quarter. When you look at where the trends are headed with more and more going online, how are you playing this space? How do you think investors should be looking at it?

JAMES LIU: Right, I mean, if you look at non-store sales versus in-store sales, this has been a trend that's been happening for about a decade where non-store sales have basically been the source of growth. Obviously, you think about the Walmarts, the Amazons, all those online retailers. Ultimately, we think this is a long term trend. I mean, I know it's a common refrain these days, but the fact that COVID-19 has basically accelerated a lot of these digital trends-- not just, you know, online video calls, but also the way we purchase things-- we think that's here to stay.

The other thing to look at today also was industrial manufacturing, industrial production numbers that came out today, which were actually a little bit better than expected. So you take the retail sales, industrial production numbers, and really, overall, the economy looks to be on fairly solid footing. Clearly, the pandemic still rages on. But I think the point is that, you know, even though we hope a vaccine comes out soon, and that would be great, that isn't going to prevent the economy to continue on pace and to continue to grow at a steady pace over the next year, at least in the medium-term.

ZACH GUZMAN: And James, I mean, if you want one more data point, I'll throw another optimistic reason for investors out there in the homebuilding sentiment numbers that we got there as well, because that was also a lot stronger than some people out there were expecting. It rose. The index overall rose to 90 versus 85 last month. That's the highest on record going all the way back to 1985. So, I mean, when you look at that-- because this reading actually includes the early part of November as well, which is, obviously, when we started seeing cases continue to become even bigger of a problem here on the coronavirus front. So talk to me about, maybe when you put all these things together, why some of those concerns that this recovery was slowing so badly-- that it would be very, very shaky heading into Q4-- what's your estimate of where we're at now?

JAMES LIU: Right, so the challenge is still that we are having the second wave, not just in the US, but around the globe. And so the question is will that precipitate further lockdowns? And we are seeing measures, clearly on a state-by-state and local government basis. But as long as we can keep things relatively under control in terms of new caseloads, then what we're seeing is that we can strike this balance for much of the economy. Obviously, there are parts of the economy where it's more difficult, where there's reduced capacity-- restaurants, hospitality, et cetera.

But as you mentioned, Zach, you know, homebuilding, for instance, that was a big question mark going into the lockdowns and even coming out of it. And now what we're seeing is that, you know, people do want to buy homes. There is a lot of homebuilding activity. We had limited supply of new homes going into the crisis to begin with. And so there is that balance that can be struck.

So ultimately, what we think for most investors-- you know, everyday investors, the way they should look at this-- is that, unfortunately, this is a lost two-year period of both economic growth and earnings growth. But right now, the forecasts are that, by the end of 2021, potentially, hopefully with the vaccine, we can basically get back to where we were pre-pandemic, and then hopefully the economy can start growing even more rapidly from there.

- James Liu, Clearnomics founder and CEO, joining us there. Appreciate your time today.

JAMES LIU: Great, thank you.