00:00 Speaker A
Michael, I want to take a step back because as I was mentioning before, there it’s fascinating this year how much of a divergence there is in some of these retail stocks, right? I mean, just pretty dramatic and maybe I mean, you always get some divergence, but how unusual is it this year? And then how much opportunity does that potentially create, especially for some of the beaten up names?
00:23 Michael
Yeah, it has been a strange year. Uh there’s really in my space only been three or four names that have outperformed the S&P 500. Now it’s very hard for a retailer to outperform the S&P 500 because you’re not a Mag 7 name, but it’s been basically the auto parts retailers, Ulta Beauty of of all names and and Walmart have have outperformed the market. Everyone else is is sort of lagging. Even today uh or this week I should say, uh you see a huge divergence. Um as I look at my list here, Walmart, Dicks, Best Buy, Kohl’s, Gap, they all beat sales for sales earnings going going back to last week. But then we had Target, Home Depot, Lows, BJs, Abby Fitch and Burlington, Miss. So it’s very divided. You know, half the company’s beating, half the company’s missing. Very, very, I think uh company specific. But in general, those that that that’s related to the sales for sales. As it relates to the stocks, it’s very hard for retailers to outperform tech companies right now. But but there have been some bright spots. Again, we’ll we’ll point to the auto parts retailers as favorite names in particular, Walmart has been a good one. Uhh in terms of discretionary names, again, of all things Ulta has been a really strong stock uh year to date.
01:14 Speaker A
And and what do you think then happens next year? I mean, because the ones that have underperformed, at least in some cases, it’s an execution problem, not necessarily a sort of general macro problem. But what do you think that how do you think that starts to play out in 2026?
01:34 Michael
Uh if I were to have a macro call for 2026 right now, rates will go, it’s come down. Uh we’re starting to see that already and we’re going to get a new uh head of the Fed as soon as May. and we think uh the the will be much more aggressive in cutting rates. Uh and so we think we’ll see mortgage rates uh start with a five handle. Uh that’s going to drive housing and housing drives a lot of purchases. So we’re we’re fairly upbeat in terms of retail sales uh next year, but needing needing the Fed to help. Uh if the Fed if we didn’t think the Fed would cut, I think it would be a pretty slow environment, but but I think there will be some stimulus next year in the form of lower rates.