Back-to-School: An Unstoppable Seasonal Trend

Matthew Carr
by Matthew Carr, Emerging Trends Strategist, The Oxford Club
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I focus my attention on what’s next.

And that means focusing on industries whose business is about to pick up in the upcoming quarters.

I know where I’m going in the market. And I know how long I plan to be in a specific sector or company. That reduces my overall risk, because I’m focusing on just the best time of the year for companies.

Today, with the markets at all-time highs, there’s a lot of grumbling that a crash is imminent.

That’s been the same story since the financial crisis, so I don’t concern myself with it.

But I do ask myself a couple of questions... With markets at record highs, where is there value? And where are new records about to be broken?

That brings us to consumer spending.

Unemployment in the last two years has fallen below 4.5%. And we’re finally starting to see some growth in wages.

This is creating a more confident consumer. And the more confident consumers are, the more they spend.

Back-to-School Season

For a lot of families, summer vacations are fading into memories. The biggest event on the horizon now is going back to school.

And we’re about to see back-to-school spending hit some records.

There are some people who got their act together and started back-to-school shopping in June. But the reality is, every year, most of this shopping takes place in the month before school starts.

That means, right now, three-quarters of all back-to-school and back-to-college spending is underway.

And this year, combined back-to-school and back-to-college spending is forecast to hit $83.6 billion. That’s the second-highest level on record.

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That will be an increase of 10.3% over 2016 and a 23% increase since 2015.

And, as you can see from the chart, this annual spending spree has really grown since 2007.

But after a peak in 2012, we had a period where total back-to-school spending dipped. Consumers were wary. And in 2015, back-to-school and college spending fell to its lowest level since 2010.

But this glut didn’t last long. In 2016, sales increased 11.4%. They’re expected to increase another 10.4% this year. These are not only the biggest increases we’ve seen in total back-to-school spending since 2011... but they’re some of the only increases in the last five years.

The College Dropout

The biggest driver of this overall growth is back-to-college spending.

This spending really bottomed out in 2015, falling 19% from its peak in 2012.

But back-to-college spending has surged 25% since that low. And it’s going to set a record this year: more than $54 billion.

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It shouldn’t be a surprise that back-to-college spending accounts for 64.7% of total back-to-school season spending.

Going to college is much more expensive than going to K-12 is.

On average, families will spend an expected $969.88 on back-to-college costs this year.

On top of this, college enrollment has been steadily increasing - and will be around $21 million this fall.

When we dig deeper into the numbers, we can see where most of the money is going to be spent.

The biggest back-to-college cost - a projected $12.8 billion - is electronics.

For K-12 back-to-school costs, electronics are expected to represent $8.8 billion. More schools are including technology, like laptops and tablets, in the classroom experience.

That means electronics purchases will represent 25% of total back-to-school and back-to-college spending this year.

(That’s slightly more than the combined 24% projected spending on new clothes.)

But investors should remember that back-to-college spending impacts a wider variety of industries than just clothes and electronics. Furniture, food and even online educational platforms play a role in that spending as well.

The goal is always to think ahead... to think of all those times on the calendar when confident consumers are going to spend their cash.

If you master this art, you’ll never be short on opportunities. And you’ll never find yourself uncertain of where to invest next.

Good investing,

Matthew

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