Strategist on retail sales: 'There’s a lot of good news going around'

Retail sales rose 9.8% in March. ProShares Advisors Global Investment Strategist Simeon Hyman joins Yahoo Finance Live to discuss.

Video transcript

AKIKO FUJITA: Sales surged in March as Americans put their stimulus checks to work. The number there, 9.8%. In the month, the Commerce Department also revising data from February to show sales dropping 2.7%, instead of that 3% that was reported previously. Let's bring in Simeon Hyman, ProShares Advisors global investment strategist. Simeon, it's good to talk to you. We're sort of framing this in the context of the stimulus checks really giving a bump to the data in March. But how much of that do you think is sustainable, given that we have seen these bumps before, only to see it pull back after?

SIMEON HYMAN: Well, look, there's a lot of good news going around. And you can pooh-pooh the numbers to some extent. I mean, you could pooh-pooh them all the time. January didn't matter because it was right after Christmas. And in February, it was impacted by snowstorms. And of course, now, we're anniversarying numbers that reflect the most intense period of the pandemic lockdown. So, year over year, sales up 28%. That's still a big number.

But let's look at the confirming data, in case you kind of thought it was a one-time bump. As an example, this morning, we had the lowest continuing claims in quite a long time, beating expectations there. And of course, we're having very strong earnings results. So there's lots of good economic data out there, not just this strong retail sales number to suggest that I certainly wouldn't bet against the consumer any time soon.

ZACK GUZMAN: Yeah, Simeon, when we talk about the other economic data, of course, unemployment claims out this morning as well. I mean, you talk about the strength of the consumer there-- probably getting stronger when you think about the finally breaking below that 600,000 initial claims number for the first time since the pandemic. I mean, what do you take away from that, as we talk about how long it's taken for this recovery to finally hit Main Street, looking strong there?

SIMEON HYMAN: The concern you might have at this point is, when will that labor market get a little tight? Where is the inflationary pressure? And interestingly also this morning, we had a number for capacity utilization that actually came in a little bit below expectations. Still improving, but below expectations, and with a reading of 74.4, well below the 80 mark of capacity utilization that typically indicates some inflationary pressures.

So, what's my takeaway from that? We got a little bit of Goldilocks going on here I think for a little bit longer. And that's reflected in where you see the 10-year Treasury. Now, look, I still think there's upward pressure on the 10-year Treasury yields from here. But I think what we're seeing is the limits of that are still well within the bounds of to the liking of the equity markets and the broader economy.

AKIKO FUJITA: What has that meant in terms of how you're shifting up your portfolio, Simeon? If we're talking specifically retail names, is it still about sort of those players that have dominated the e-commerce side of things, or do you see other opportunities popping up?

SIMEON HYMAN: If you look at the retail sales report this morning, you'll see that the non-store numbers, which you can say roughly equals e-commerce-- the formerly commerce numbers only come out once a quarter. But those were up almost as much year over year, within less than a percent or so of the increase in the regular retail sales numbers. So what that tells us is that e-commerce remains a very important opportunity to take advantage of both the incessant transformational trend towards online retail, but to also participate in the reopening trade in the strengthening of the consumer.

I mean, look, in the very near term here, we've seen eye-popping rebounds from things like autos. And you were mentioning the leisure business, so the cruise lines. These are all in that consumer discretionary sector. But very interestingly, if you look at, as an example, the ProShares Online Retailer Index, it's actually trading at about a 40% discount to that consumer discretionary sector, with that transformational trend behind its back. So we think that continues to be an important opportunity in terms of participating in the reopening trade, but also on the right side of a long-term trend.

ZACK GUZMAN: Yeah, outside of e-commerce, I'd be curious to wonder what kinds of other plays might stem from that, too. Because we've talked a lot about if that's going to hold up after the pandemic as things get back to normal. It's still going to be the bigger question, I suppose. But some of those other industries tied around it-- you think about online advertisements and we've seen the benefit to Pinterest, Snap, Facebook, some of these companies levered to kind of focusing in on the way that advertisers might want to attack the e-commerce play. Is that spillover maybe something that might get overlooked here, too, when it comes to how much people are paying for e-commerce versus advertising? Talk to me about valuations here.

SIMEON HYMAN: Yeah, as I mentioned, it is surprising that the e-commerce valuations actually look pretty darn reasonable at a noticeable discount to consumer discretionary. But you're right. There are opportunities in the broader, shall we say, ecosystem of directly reaching out to consumers. So there's no question there's a little bit of a broader play here, too. But in terms of other sectors that are potential participants here, one thing I'll note, of course, is the very strong earnings coming from [INAUDIBLE].

And that's likely to continue, too. What we'd highlight is the opportunity perhaps even in the mid and small cap financials. They've got less other stuff going on. It's true. So you may not necessarily see the-- some of the trading in the SPAC oriented highlights. But they are notably more sensitive to steepening of the yield curve.

And again, notwithstanding the yield curve being well within the comfortable bounds for the equity markets, the likely steepening is certainly going to be good for financials. So that-- we should-- let's-- to sum it up, you shouldn't ignore the regular plays in a strengthening cyclical recovery and only focus on the opportunities in sort of the new economy. Both are important to be a part of your portfolio at this juncture.