When It Comes to the Consumer, Facts Matter More Than Feelings

Growing up, my mother was always the person in our house that was quick to utter the kind of folksy wisdom that my sisters and I scoffed at, but which seeped into our beliefs. As it did so, it taught us some valuable life lessons. For example, she taught us that the only divide that matters between people is not black and white, nor straight and gay, nor male and female, but good people and bad. They exist in about the same ratio in all of the subcategories of humans that we invent, and the secret to a happy life is to understand that simple fact, ignore all of these other artificial divisions, and focus on spending time with good people.

She also taught us all that we should always judge people by what they do, not what they say, and that is something that comes to mind this morning as I sift through the early data on American consumer behavior for Black Friday. The benchmark report is the one issued each year by Adobe, and this year's version of that report makes for encouraging reading: Americans spent $9.8 billion on Friday, setting a new record. Lest you think that is all because of inflation, that was also more than economists, who account for that kind of thing, predicted. That number is all the more remarkable because this year, so many retailers launched their “Black Friday” sales earlier in Thanksgiving week.

And yet, if you look at the available polls, a large number of Americans apparently believe that the economy is in a bad way, with many believing that we are headed for a full-blown recession next year. This Sawyer Business School/USA Today poll, for example, that was published in September, found that 70% of us believe that the economy is getting worse, not better. So far, though, the evidence just doesn’t support that contention. Unemployment is hovering around all time lows, wages are continuing to climb, and inflation has been falling since it peaked at 9.1% in June of 2022.

This isn’t just an economic problem. In America these days, there is a tendency to value people’s feelings over factual evidence. When pressed about why they believe certain unproven or demonstrably false things, people’s answers often come down to, in effect, “It feels right to me.” While ridiculous in many ways, it is understandable when it comes to matters of opinion and faith, things like politics and religion. It should, however, have no place whatsoever in economics, trading, or investing. Opinions matter there when attempting to forecast the future but, if you want to maximize your returns, those opinions should be based on the available facts. Right now, those facts show that the economy is not that bad, and consumers are doing just fine.

This weekend provided yet more evidence of that: here, we turn to my mom's words of wisdom and judge people by what they are doing, not what they're saying. The naysayers will point to the fact that we were all very deal-conscious this Black Friday, or that much of the spending was on credit, which has become increasingly expensive over the last year or two. Or maybe these naysayers will find some other reason to question the facts. It could be that at some point in the future, those things will hold back American consumers but, as of now, we are spending freely.

That will support the economy as long as it continues. So I, as someone who believes in the value of data and who tries to live in the real world, am much more optimistic about the economy and the stock market now than I was just a week ago.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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