Speaking of J.C. Penney, it hasn’t done well at all in recent years (in case that slipped your notice). In fact, many mid-market retailers have trailed behind their up-market peers since the market crashed in 2008.

And I can think of at least two reasons for that.

First, unprecedented levels of stimulus from the Fed have worked to push up the price of risk assets like stocks. This has disproportionately benefited the wealthiest 10% as they’ve always been more invested in the stock market than the average Joe.

As the Fed pumped money in the system, the wealthiest of the wealthy were cushioned from the worst of the fall. And that meant they still had discretionary income to spend at luxury retailers like Tiffany Co.

The second reason links back to demographics. The spending of high-income earners peaks later – about five years later – than the population as a whole. So while most Americans hit their peak spending years in 2007, the top 10% has continued to spend.

These factors combined have led to a divergence in the retail arena, where the high-end luxury retailers have fared much better.

Here’s a look at J.C. Penney’s stock (JCP) juxtaposed with Tiffany Co (TIF).

See larger image

As you can see, both stocks bottomed out together in early 2009. And both mounted an initial recovery much of that year.

But then the two diverged.

JCP is now worth just 45% what it was at the height of its post-crash rally, in October 2009. Forget about its worth compared to 2007!

Meanwhile, Tiffany Co continued to gain ground. Today, despite having a rougher 2012, TIF is still worth 114% more than it was in October 2009.

Time will tell whether or not this divergence continues. Even the high-income earners in the U.S. are now hitting their peak spending years. We’ll see…

If you haven’t done so already read the Survive & Prosper issue on “According to the Bureau of Labor Statistics (BLS).”



Is Your Portfolio Ready for What's Next?

Investing is no longer a set-it-and-forget-it affair. If you’re still using that outdated approach in today’s irrational markets, you’re setting yourself up for massive losses and a difficult retirement. There’s a much… Read More>>
Adam O'Dell
Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.