What Economic Shock? Here's Why America Has Adjusted to Stress

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People have a way of adjusting to all sorts of stressful situations, including market volatility.

A recent study by the American Psychological Association showed that Americans are becoming more used to shocks, and that the population of self-described "very stressed" individuals has dropped to 22%, down from 24% in the previous year and 32% in 2007.

So what's easing the stress of the average American? Two theories reign. The first is that the survey itself is flawed.

The second, voiced by some psychologists, is that "after five long years of financial turmoil, Americans might -- just possibly -- be getting used to shocks. The type of instability and economic pain that used to spark stress, in other words, is losing its ability to unsettle people."

Go with the flow
Consider, says Gillian Tett of FT Magazine, before 2007 many economists and citizens alike thought America was on the right economic path. "That sense of stability extended into many non-economic areas, too: after the collapse of the USSR, it seemed that western capitalism had triumphed and trust in most western institutions was pretty high."

But things changed, and people reacted. Studies show that in 2007, 65% of Americans trusted their banks. Today that number is 35%. Trust in the government isn't much better.

"But, while this new mood of cynicism has some debilitating consequences, it also has an advantage: when people have already lost their innocence -- or faith -- they are less prone to being shocked... For the generation now entering the working world for the first time, such instability and pain might almost be the new normal."

Business section: Investing ideas
So, we'd like to focus on investing ideas with an exposure to a more resilient U.S. consumer. Are there any retail-related stocks seeing a turnaround in bearish sentiment?

For ideas, we collected data on short-seller trends and identified a list of retail stocks that have seen a sharp decrease in shares shorted over the last month (i.e., a decrease in bets that these stocks will decline).

This is significant, especially when you consider that short-sellers tend to be more sophisticated investors (because they require strict credit approval to perform these trades). So if these investors are turning bullish on a stock, it's worth paying close attention.

Short-sellers think the upside potential of these retail stocks outweighs the downside -- do you agree? (Click here to access free, interactive tools to analyze these ideas.)

1. Lululemon Athletica (NAS: LULU) : Engages in the design, manufacture, and distribution of athletic apparel and accessories for women, men, and female youth primarily in Canada, the United States, and Australia. Shares shorted have decreased from 14.85M to 12.89M over the last month, a decrease which represents about 1.98% of the company's float of 99.02M shares.

2. Pacific Sunwear of California (NAS: PSUN) : Operates as a retailer rooted in the action sports, fashion, and music influences of the California lifestyle. Shares shorted have decreased from 6.47M to 6.08M over the last month, a decrease which represents about 1.07% of the company's float of 36.45M shares.

3. Cost Plus (NAS: CPWM) : Operates as a specialty retailer of casual home furnishings and entertaining products in the United States. Shares shorted have decreased from 2.90M to 2.47M over the last month, a decrease which represents about 2.71% of the company's float of 15.89M shares.

4. Chipotle Mexican Grill (NYS: CMG) : Develops and operates fast-casual, fresh Mexican food restaurants in the United States. Shares shorted have decreased from 2.97M to 2.60M over the last month, a decrease which represents about 1.2% of the company's float of 30.76M shares.

5. P.F. Chang's China Bistro (NAS: PFCB) : Engages in the ownership and operation of restaurants in the United States. Shares shorted have decreased from 4.71M to 4.46M over the last month, a decrease which represents about 1.2% of the company's float of 20.80M shares

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


ist compiled by Eben Esterhuizen, CFA. Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above.

At the time this article was published The Motley Fool owns shares of lululemon athletica and Chipotle Mexican Grill. Motley Fool newsletter services have recommended buying shares of lululemon athletica and Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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