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Quick Thought Of The Week: Santa

This is the most wonderful time of the year, according to crooner Andy Williams. And children all over the world will be hoping that Santa will be filling their Christmas stockings with the presents that they have asked for.

I have a wish list too. It doesn’t involve an iPhone X, an Oculus virtual reality headset or a Mavic Pro drone, though.

Instead I would like to see those companies that are sitting on piles of cash to put some of that money to work. They could start by rewarding staff with more pay.

For many years, workers around the world have either not received a pay increase or, if they have, the pay rises have been pitiful. Putting money into the pockets of consumers will be vital, if we want the global economy to continue recovering.

Consumer spending can be one of the most important drivers of economic growth. It can account for as much as three-quarters of a country’s gross domestic product….

….But for the last ten years, many have been reluctant to spend in the face of uncertainty.

Who can blame them?

Who would want to spend, when it is unclear if there will be a job to go to the next day? Thrift is a natural response to economic uncertainty.

However, too much thrift can be counterproductive. It can drive down aggregate demand, which could cause businesses to produce less…..

…..That in turn could force companies to cut staff levels. So the one thing that workers fear most, namely, redundancy, could become a reality, as a result of their own doing.

Consequently, restoring consumer confidence is absolutely crucial.

Everyone has a part to play. Companies need to reward workers with higher pay. Governments need to reward its people with tax cuts.

Some are doing it already.

So it might pay to watch consumers closely in 2018. They could point us in the direction of lucrative investing opportunities. After all, Peter Lynch once said: “If you like the store, chances are you will like the stock”.

So follow consumers and watch where they are spending their money.

A version of this article first appeared in Stock Advisor Singapore and Stock Advisor Gold.

 

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.