• Are You Bearish Enough? All Hedgeye Products → Up To 65% Off

    Don’t panic. Get your portfolio proactively prepared. This is a limited-time offer to the sharpest investing research money can buy.

On March 6th when I wrote the Early Look "The Wall of Worry," the market was making new lows, but we were seeing a number of companies in a disparate group of industries that were seeing new signs that things were not continuing to accelerate to the downside - things were becoming "less bad." Now less bad is the "new good."

We continue to see signs that the "new good" continues. Today, we learned that February sales at U.S. retailers fell less than forecast and the "made up" gain in January was even better than the previous government number, suggesting that the consumer, the most important part of the economy, may be stabilizing. We will likely learn tomorrow that consumer confidence is stabilizing - the "new good" is that confidence hasn't slipped any further from last month's. Importantly, if the market holds its recent performance, March will improve from February. You don't need a survey to tell you that most Americans are not very confident in the economy. The "new good" is that confidence looks to be bottoming.

In this environment the consumer is increasingly rethinking or being more thoughtful with his purchases. Consumers are more focused on needs over wants...... Job insecurity and other macro factors have definitely caused consumers to pinch on spending, but importantly, today's better than expected retail sales number indicates there is still some level of spending. What is more important is the behavioral changes to the pattern in consumer spending. You can bet consumers will be more thoughtful when spending their hard earned buck. Most are likely to consider each purchase more carefully and be more price conscious even when it comes to non-discretionary spending. It's likely that discretionary spending will suffer disproportionally, particularly as it relates to purchasing high-end goods, as sticking to a budget will become the "new normal" and large credit card balances will be considered a sin.

Critical to the behavioral changes is the fact that these changes are not limited to one demographic or income group. A survey done by an Ohio-based group suggested that more than "eight in ten people earning in excess of $150,000 or more indicate the current economic crisis will impact their lifestyles over the next five years."