What's Next For The Retail Sector After September's Sales Beat?

September retail sales grew 1.9%, which beat expectations and this marked a reversal from August's sales growth that fell short of estimates, Ally Invest's Chief Investment Strategist Lindsey Bell said on CNBC.

'Really Strong Number': Friday's retail sales data shows the consumer "remains resilient," especially clothing and accessories sales that grew 11% month-over-month, Bell said. While this is a "really strong number," it could signify consumers are merely getting ahead of themselves
and spending will slow down in the near-term.

The consumer wants to have a "good holiday season" so retail spending through the end of 2020 should remain strong.

Related Link: 'Continued Economic Rebound': Stock Market Update For The Week Ahead

Retail Progress: Bell said economic data and sales readouts make it clear the retail sector experienced a "big rebound" from the Spring lows. But we haven' reached a point where some of the economic data is starting to slow down amid stimulus uncertainty from Washington and spiking COVID-19 cases in some regions.

Consumers should be able to "weather the storm" for the next few months as the general consumer was in a better position prior to the pandemic outbreak, she said. However, financial aid will be needed to support the economy at recent growth rates.

'Cautiously Optimistic' Looking forward to the end of 2020, it's difficult to rely on past history to try and model where the market is headed, she said. The fourth quarter is historically the best time for stocks with an average 3.9% return in the S&P 500 index.

However, the index is up already 3.6% since the fourth quarter started just 12 days ago. Volatility will likely continue through the end of the year, but there are enough reasons to be "cautiously optimistic."

"We are in the later stages, at least I believe, of the coronavirus crisis, and we are still in positive stages of the reopening story," said Bell.

Better Early Than Late: Small-cap stocks are closely correlated with economic performance and it might be too early to conclude how the economic trajectory is moving forward, she said, but it's better to invest "too early than too late."

Bell is "starting to begin" to look at financial stocks. The sector has underperformed the most since the market rebound but it should "pop the most" as investors look for value-oriented sectors.