The broader S&P/ASX 200 Index (ASX: XJO) is sold off today, down 0.8% at the closing bell.
ASX 200 shares are widely following the lead of US share markets, which fell yesterday (overnight Aussie time) on investor fears of rising inflation.
But not all Aussie shares are slipping.
The JB Hi Fi Ltd (ASX: JBH) share price closed up 2%. And gaming stock Aristocrat Leisure Ltd's (ASX: ALL) share price ended the day up 2.3%.
Both these companies fall into what you may have heard called discretionary retail. That is, they sell items that you may want to have but most likely don't really need to have. Like that newer model TV. Or the super-cool drone you've had your eye on.
Non-discretionary retailers, on the other hand, sell items like bread… or toilet paper. The essential stuff you can't really do without.
Cashed up consumers with pent up demand
The pandemic, somewhat counterintuitively, has sent average household savings up far higher than before COVID struck. That's thanks to record levels of government stimulus for both businesses and households in most developed nations while many folks remained stuck at home.
According to Bloomberg:
Consumers in the world's largest economies amassed [US]$2.9 trillion in extra savings during Covid-related lockdowns… Half that total — $1.5 trillion and growing — is in the U.S. alone, the data show…
The optimists are betting on a shopping spree as people return to retailers, restaurants, entertainment venues, tourist hot spots and sports events as well as accelerate those big-ticket purchases they held back on.
The same story is playing out Down Under. According to the Australian Financial Review, "Australian households saved $187 billion over 2020, more than the previous 3½ years combined".
Advantage ASX 200 discretionary retail shares
In a live Webinar yesterday, Bell Asset Management's Senior Global Equities Analyst, Nicole Mardell said 2021 offers some particularly appealing opportunities in consumer discretionary shares:
Within the discretionary space there's a lot of pent-up demand that's still to be realised across a number of subsectors. The consumer represents about 75% of the US economy, and that consumer has just been flooded with a whole bunch of cash. And they're still in lockdown.
Consumers also make up a huge chunk of the Australian economy, some 65% or so. And while cashed-up consumers are unlikely to buy more bread, they're quite likely to splurge on those non-discretionary items they've been eyeing.
And that could spell good news for the share prices of leading ASX 200 retailers.
