11.28.2011
By Terry Flanagan

Consumers Drive Markets

ING Asset Management’s chief market strategist puts faith in the consumer to lead U.S. markets.

In the fourth quarter of 2010, U.S. GDP stood at 2.6%. A small dip this year, at 2%, is not exactly a positive story for the U.S. economy. Despite this, some market participants have faith that consumers will revive the U.S. economy in 2012.

Consumers, along with strong corporate profits, solid earnings and emerging market equity growth, highlight a positive “fundamental” story for the markets, said Douglas Cote, chief market strategist for ING Asset Management.

Cote’s bullishness on the strength of the U.S. consumer originates most recently from a positive few days of strong retail sales. Sales on the day after Thanksgiving, or Black Friday rose 6.6%, compared to last year, according to data provider ShopperTrak. The National Retail Federation also reported consumers spent 9.1% more on Black Friday than they did last year.

“The markets are about fundamentals and global risk,” Cote told Market Media. “The consumer is the game changer, along with strong corporate profits, and (on the aggregate) a record level of earnings—how can investors not be in the equity markets when prices are at a discount?”
Cote noted that those worried about macroeconomic concerns, such as the Eurozone crisis are missing domestic opportunities—opportunities that will march forward in 2012.

“I knew Black Friday and Cyber Monday will be blockbusters –the consumer is stronger than anyone understands at 30% of the economy,” he said.
The first quarter of 2012 will be led by consumer discretionary companies, ING’s “favorite sector,” according to Cote, followed by technology, which largely follows the consumer.

Ultimately, investors will benefit from “revenue coming from companies’ top lines,” noted Cote—driven by “resurgence in consumer spending.”
“We’ve been advising clients that in spite of the continuing Euro crisis, and in spite of changing leadership around the world…markets, have to pay attention to real economy. The market turmoil was being overplayed,” Cote noted.

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