How Merry Will Christmas Be?

With thanks to those who wondered what happened to this column: it’s back!

American markets today, Monday, viewed several hours before the 9:30 a.m. EST opening, appear set for a strong start reflecting continued – though careful – optimism about the recovery. Whether news from the Federal Reserve Bank erodes the positive outlook later in the week remains to be seen.

Canadian markets are poised to start strong, also reflecting optimism about the recovery.

European markets are open at time of writing and major indices there are all positive but dropping slightly, reflecting nervousness over the renewed – and fourth -- lockdown in Austria and the strong likelihood of restrictions to come in Germany and possibly France.

In terms of precious metals, gold is dropping while silver is rising at time of writing.

Amongst currencies, the Canadian dollar is in the green while the Euro and British pound sterling are dropping against the American greenback. The COVID protests in Europe will not help the Euro, according to, Jeremy Thomson-Cook, Chief Economist at international business payments company Equals Money.

“Riots and burning cars have littered the streets and the headlines in Europe in protest of harsh new lockdowns on the continent put in place to fight the uptick in Covid-19 infections,” mean downward pressure, he says. “Alongside the weakness in recent European data points and the noises coming from the central bank, there really is very little reason we see that markets will be long EUR at the moment.”

While some Democrats oppose the renewal of Jerome Powell as Chair of the Fed, his continue hand on the helm would have a positive impact on the greenback, Thomson-Cook says.

Amongst other factors to watch today: whether Middle East hostilities affect oil prices as the unending battle between the Saudi Arabia coalition and Yemen’s Houthis continues with no end in sight. On Saturday, the Houthis claimed to have launched fourteen drones targeting Saudi Arabia cities and oil facilities while on Sunday the Saudi Arabia news agency said the coalition hit thirteen Houthi targets. The extremely complex conflict can be best understood as a proxy war between Saudi Arabia and Iran (because it backs the Houthis) and by extension for influence in the region and shows no sign of resolution.

Closer to home, we will get some clues this week about how merry the Christmas season might be for investors in major retail companies. Due to the pandemic, last Christmas worked well for retail outfits with well-oiled online facilities. This Christmas, shoppers are out again but overhanging all of this potential good cheer looms the very mixed threat of empty shelves due to supply chain problems. Major retailers believe they have worked around it. Walmart Inc., Target Corp., Home Depot Inc. and Costco Wholesale Corp. say that they have solved the problems by chartering ships. The $2 million-plus price tag per ship may be tolerable for those companies but smaller operations may not be able to ante up that kind of cash.

Some of the clues will crystallize almost immediately.

Best Buy Co Inc. reports its third quarter results tomorrow, likely showing reduced demand for electronics necessary for the work-at-home trend after the huge increase generated by the trend during the pandemic. Investors will be listening for clues about whether – and if so to what extent– shipping problems and chip shortages will affect Christmas inventories.

Also tomorrow, Abercrombie & Fitch Co. posts third quarter results, likely showing renewed sales as customers shopped for new clothes with re-openings. Investors will be looking for clues about holiday inventory and supply chain solutions.

GAP Inc. releases third quarter results, also tomorrow, likely showing positive demand for its clothing inventory as shoppers resumed pre-pandemic shopping habits. At the same time, investors will again listen for clues about potential supply chain problems during the Christmas shopping period.

Nordstrom Inc. reports its third quarter results tomorrow, likely also boosted by shoppers returning to stores as with the other chains. And as with other chains, investors will be looking for company plans to deal with possible product shortages during the holiday season.

Similarly, American Eagle Outfitters Inc., also reports third quarter results tomorrow, likely boosted by consumers buying clothes for returning to offices and schools and will also face investor concern about supply chain issues. Dollar Tree Inc. also reports third quarter results on Tuesday with many of the same expectations.

Urban Outfitters Inc. reports today and analysts will have similar questions.

By Wednesday, we will have at least some idea of how merry this Christmas season might be for investors in these companies.

Disclosure: I do not own any shares in any company mentioned in this column.

Al Emid is a financial journalist, broadcaster and author with two books underway. The Emid Report on Volatility 2022 is scheduled for release in January 2022 and his book on overseas investing is scheduled for release in January 2023.

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