The nine-year bull market for U.S. stocks still has room for growth in 2018, but the outlook isn’t so great for consumer discretionary stocks such as retailers and apparel and beauty brands.According to Savita Subramanian, head of U.S. Equity and Quantitative Strategy at Bank of America Merrill Lynch Global Research, the S&P target of 2,800 by the end of 2018 will be “7 percent higher than today.”She spoke at a presentation Tuesday on the company’s 2018 outlook. “We’re not done with the bull market yet,” she said, noting that earnings expectations for next year look decent, but could be great with tax reform. Her team is projecting 6 percent growth in earnings per share for the S&P 500, outside of corporate tax-related benefits.Subramanian reasoned that investors “haven’t hit euphoria in the U.S. equity market, which is needed at the end of a bull market.” Her recommendations are sticking with equity stocks in 2018, buying growth shares in materials and financials, and technology stocks. That’s bad news for retail and apparel shares, a sector she has underweighted along with utilities and real estate.According to Subramanian, the problem with consumer discretionary stocks in a period of Federal Reserve tightening of liquidity through interest-rate hikes is that it tends to result in the companies feeling pressure from wage increases and margin squeezes.She also noted that if companies repatriate money from overseas, they likely would use just 50 percent of that for stock buybacks, and reserve the balance for other uses such as mergers and acquisitions. Consumer goods firms also could elect to give some of that back to consumers through lower prices and more promotions. Rather than spur consumers to buy more and provide some revenue growth, Subramanian cautioned that the impact could have the effect of pulling from “tomorrow [or future growth] to today.”Michelle Meyer, head of U.S. economics, forecast 2.4 percent gross domestic product growth in 2018, and then slowing to 2 percent in 2019. She is also predicting inflation to rise to 1.8 percent by the end of 2018, and to 2 percent by the end of 2019. Meyer said the labor market would likely tighten next year, which typically leads to wage growth for workers. She is expecting the Federal Reserve to raise rates this month, and raise rates three more times in 2018 and another two rate hikes in 2019.Ethan Harris, head of global economics, said the global “bullishness on growth is warranted.” For 2018, the economist expects 3.8 percent global GDP growth, up from 3.7 percent in 2017. He said the synchronized global recovery is due mostly to accommodative worldwide monetary policy, leveling off of the slowdown in China and the increasing confidence of investors who have learned to ignore political and geopolitical risks.There were some cautionary points raised by Michael Hartnett, chief investment strategist, who said the “financial returns since 2009 have been abnormally strong.” He noted that wage inflation could be a game changer, since when “wages go up, that’s less good for profits.”Hartnett — zeroing in on the not-so-rosy parts of the economic backdrop heading into 2018 — also said that given the expected higher inflation and rising corporate debt levels and bond volatility, an end to easy monetary policy could be most damaging for corporate debt. Along with record-high art prices, soaring rates for crypto-currencies, exponential Nasdaq growth and climbing global debt levels, there are already signs of possible bubble-like behavior. All that means there could be the potential for a slowing down of global growth in the second half of 2018, he cautioned.
Supermodel @helenachristensen teamed up with longtime friend and designer @camillastaerk on a joint @paredeyewear collaboration. The lineup features three styles and 11 offerings, all of which embody a vintage feel. Get all the details on how they celebrated the collab on WWD.com. #wwdaccessories #wwdeye (📷: @slovekinpics)
“It’s a hard industry to keep motivated, as well, so finding different subjects and people is what makes it worth it – when you’re like, oh, I’ve met great people, I feel like I’ve done something good, and I feel proud of having done this,” said French actress Stacy Martin on being grateful for the variety of roles she’s take on. Read @ktauer’s full interview with Martin on her her latest film “Godard Mon Amour.” #wwdeye (📷: @danieldorsa)
After showing in front of the Eiffel Tower for his last two women’s ready-to-wear collection, it looks like @anthonyvaccarello may be heading to the Big Apple. Sources say the designer will stage his next @ysl show in NYC on June 6. Get all the details on WWD.com. #wwdnews #wwdfashion (📷: @aitorrosasphoto)
EXCLUSIVE: Two and half months after John Targon, cofounder and codesigner of Baja East, was hired as creative director of the contemporary division at Marc Jacobs, he has left the company, WWD has learned. Marc Jacobs International, which is owned by LVMH Moët Hennessy Louis Vuitton, confirmed Targon’s departure in a statement: “John Targon is a talented designer and we appreciate the work he has done here. Ultimately working together did not make sense for the brand and we wish him the best.” Read the story by @jessiredale, link in bio. #wwdnews
@theluxurycollection is officially launching a collection, tapping Sofia Sanchez de Betak for the capsule. Over 30 styles will be featured in the Chufy x The Luxury Collection, debuting next month at Bergdorf Goodman, The Webster, FiveStory and more. De Betak, known as “@chufy,” drew inspiration for the collection from her trips to Japan in the past year #wwdfashion
@lhd, founder and CEO of @thewebster, has teamed up with @lebonmarcherivegauche for the European launch of her ready-to-wear line, LHD. The launch will come with an exclusive pop-up opening today that’s set to run through May 20. Located on the second floor, it carries her debut Miami-themed resort collection, launched in November as see-now-buy-now. #wwdfashion