The S&P Retail Index (RLX) has fallen amid retail sales fears.  Given the fears of US recession, the fall comes as little surprise. Indeed, some see the 16% fall in the RLX as a lucky escape compared to the 62% fall in the Nasdaq. But the non-tech stocks in the RLX have bolstered its average substantially – retailers may not be as badly off as many think. The right fiscal policy could bring a reversal in the sector’s decline. In light of Monday’s significant stock market drops, the S&P Retail Index (RLX) closed down 3.9% to end at 849.14 points on Monday. This comes after US retail sales fell 0.2% to $274.5 billion in February on the back of an upwardly revised 1.3% gain in January. Combined, these sales matched overall expectations, but the trend remains downward.

Although less volatile than the NASDAQ, the RLX is succumbing to fears in the retail sector that have prompted profit warnings and economic forecasts of recession in the US economy. In comparison to the almost 62% fall in value of the NASDAQ since its high of 5,048 points in March 2000, the 16% fall in the S&P Retail Index (RLX) since reaching a high of more than 1,020 points in April 2000 would be easy to dismiss as a lucky escape. In fact, the numbers might hide some interesting facts.

Although both indexes share some companies, retail indicators among stocks exclusively indexed by the RLX have bolstered its average, negating many of the losses reflected in the NASDAQ. This may be an indication that, despite the warnings, the US retail sector is in better shape than many industry pundits think – an idea partly supported by the upward readjustment of the grossly pessimistic January retail sales figures.

The gains in the NASDAQ since 1998 have been largely wiped out and the challenge for the US economy now lies in its ability to readjust expectations for economic growth and prosperity. It is this shift in attitude that could feed into either recession or a restabilization of the economy. Fiscal policy could make the difference between a continued decline and a marginal reversal in the direction of the US retail sector.

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