What the ‘Airport Indicator’ Could Mean for Your Investments

Chris Versace

Chris Versace is a financial columnist and equity analyst with more than 20 years of experience in the investment industry.
[Airbus A380 airplane]

As you probably know, there are several parts that drive the U.S. economy — manufacturing, business investment, government spending and so on. One of the biggest is consumer spending.

During the last few months, we’ve seen the manufacturing economy here at home slow, and both rail and truck traffic have softened. Naturally, this has ignited concerns about the domestic economy. This has many, including myself, looking at consumer spending in recent months.

It’s a great question, considering nearly one in every three Americans lacks any retirement savings. And according to a new Bankrate study, nearly 65% of Americans lack sufficient emergency savings. An emergency savings cushion should cover at least six months of your expenses.

If you were hoping for some good news on the consumer spending front and what it means for the economy, I’m afraid you’re going to be disappointed.

Analysis of June sales showed a 6.1% drop year over year, with store traffic plummeting by 9.1% year over year, according to store analytics provider RetailNext’s Retail Performance Pulse report.

Last week, Gallup reported flat June consumer spending — flat month over month and year over year — noting that higher prices meant consumers were buying fewer goods, as their dollars didn’t stretch as far.

What also caught my attention was the growing number of airlines that are reporting disappointing results. Virgin America (VA) and others are reporting disappointing June Traffic, with declines in revenue, passenger miles, available seat miles and load factors. Not too long ago, American Airlines (AAL) announced plans to cut capacity growth in the United States. Just yesterday, Spirit Airlines (SAVE) revised its near-term financial outlook lower.

Perhaps all those past price increases that have made air travel so expensive have finally come home to roost!

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The topper came with yesterday’s June Retail Sales report. Given the above data, I was bracing for a weak report, but it was far worse than expected. Per the official government statistics, U.S. retail sales fell 0.3% in June vs. an expected rise of 0.2%.

I’m sure you’ve noticed the upward creep in gas prices during the last few months; excluding that, June retail sales were even worse!

When taken together and combined with the weak industrial data points that we’ve been getting during the June quarter, this implies a rather weak economic bounceback from the dismal March quarter. It’s certainly one that’s weaker than many had been expecting back in March.

What does it all mean for you?

With so many Americans behind where they need to be financially, as we are seeing, Mr. and Ms. Consumer will be hard to find this summer.

One way you can improve your financial picture, given the low to no interest rate environment, is to invest. I have two thoughts on the jawboning Fed Chair Janet Yellen is doing about a potential interest rate hike later this year. First off, any action will remain dependent on the economy. As we’re seeing, it’s not exactly lighting things up. Second, even if the Fed does bump rates higher, interest rates will still be near all-time lows.

That means plunking your money into a savings account isn’t going to really help you.

A more viable strategy is to invest in dividend-paying stocks, particularly those with higher dividend yields. Even Warren Buffett wrote in his 2012 Annual Report, “We relish the dividends we receive from most of the stocks that Berkshire owns.”

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One of my favorite investments is in what I call “dividend dynamos.” Those are companies that year in, year out increase their dividends paid to shareholders. These dynamos also tend to have a nice step-up in their share prices as those dividend payouts increase.

To me, that’s a great way to supplement your income as well as get some growth. To learn about one of my hottest Growth & Dividend Report recommendations (up 53% as I write this), just follow this link.

That’s one of the strategies subscribers enjoy with my Growth & Dividend Report each and every week.

Thematic headlines of the week. Each week, I digest a smattering of reports, surveys and other articles to make sure the tailwinds behind each of my PowerTrends, as well as my Growth & Dividend Report recommendations, are intact. Here are some of the items that caught my attention during the last week:

In case you missed it, I encourage you to read my e-letter column from last week about how the U.S. economy fared in Q2 2015. I also invite you to comment in the space provided below my commentary.

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Upcoming Appearances

  • Each Monday, I join Sonoma County’s Morning News with Melanie Morgan’s “Big Story” of the week to talk about the latest in the economy, stock market and more.
  • Each Friday, I join Matt Ray, the host of America’s Morning News, to talk about the latest on the economy, stock market and more. With the show broadcast in more than 170 markets, be sure to tune in.
  • I will be attending the San Francisco MoneyShow, July 16-18, at the Marriott Marquis. To register, click here. Mention priority code 038970.
  • I want to invite you on a cruise with Newt Gingrich, Mark Skousen and me, among others, Sept. 13-20. Spend seven fabulous days aboard the six-star luxury liner, the Crystal Symphony. We will travel from New York to Montreal with noted historical scholars, political pundits and renowned market experts who will share their insights and perspectives on the current environment in Washington and Wall Street. For further information, including how to sign up, visit www.PoliticsAndYourPortfolio.com.

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We are now just past the halfway mark of 2015. And as the French say: “plus ça change, plus c'est la même chose.”

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