Corporate America feels the change as consumers alter their buying habits since the economic slowdown caused by the mortgage crisis and resulting credit crunch last year has not been such bad news for everyone, reflecting both behavioural shifts among US consumers and the advantages enjoyed by those companies that are less dependent on the US domestic market than most of their competitors.
Wal-Mart, the largest retailer in the US, has a mass discount business that is focused on low-income consumers, who have been the hardest hit by rising energy prices and tightening credit. It's shares have risen by 23% since last October, when the credit crunch started picking up pace, to hit their highest level for 4 years.
And this is typical for these kind of companies when the economy is not doing too well anymore. I wrote about this several times to my subscribers already and why this is so. In bad times no one is going to stop eating and drinking just because the economy is in a recession. So what do you have to do? Go shopping of course. The same goes for the healthcare sector. If people need medication and pharmaceuticals, they won't stop buying them either just because of an economic pull-back. But most of us will definitely have second thoughts on buying a new car or tv etc, when times are bad and not everyone can afford carrying a fat wallet around with them!
That's why cyclic sectors like car manufacturers, tourism etc. are far more affected by economic pull-backs than sectors that supply us with our daily necessities because people just don't have as much access to cash in economic turmoils as they are used to and, that clearly has an impact on how people behave in these times!
Wal-Mart has also confirmed that it was benefiting from more traffic at the hundreds of stores across the country. The retailer also noted that customers overall are using cash, rather than credit cards.
Same with Procter & Gamble. The worlds largest consumer products company reported that sales of it's leading brands such as Pampers and Tide are still going strong. So when markets are in a down-spin, it doesn't automatically mean that every company is affected. On the contrary. Some even benefit.
Another bright spot on the corporate American landscape are those companies with large export markets, which are helped by the weak dollar, and those exposed by booming sectors, such as energy and mining, and energy markets.
Other companies that have reported strong first-quarter profits are Apple, Goodyear (boosted by the weak dollar) and Caterpillar (the worlds biggest maker of bulldozers), Boeing and Honeywell that were buoyed by strong overseas demand.
So not everything is bad on the US economic front! And if things carry on as above and we don't see another credit crunch, or higher energy and food prices spoil the game (or something to that effect), we should sail out of the current market slowdown, or if you like, recession, pretty smoothly.
