The S&P 500 has finally cracked the 3,000-point barrier that a lot of investors were hoping to cross months ago. Thanks to dynamic stocks like Amazon (AMZN: $2,017, up 4% this week), we're ahead of the game.
Fed Chair Jay Powell effectively told us to expect a rate cut at the end of July as central bankers remain, in his words, "committed to using our tools" to keep the domestic economy in a relatively good place despite tensions overseas. The prospect of cheaper money on the horizon is doing great things for the market mood, boosting our dividend-paying portfolios as well as companies that depend on easy financing to fuel their growth plans.
It's also started healing the yield curve if you've been worried about that. Short-term Treasury rates are coming down in anticipation of looser monetary policy ahead. Longer-term rates are nudging up, providing a little relief. While it will take time to resolve all the twists in the middle of the curve, at least the ends are moving in the right directions now.
Meanwhile, we're pleased to see stocks like Amazon keep recovering the last bits of ground their lost late last year. Amazon is now just 0.6% from rejoining the $1 trillion market cap club where Microsoft (MSFT: $138, flat) is currently the only serene member. We could see that happen by the end of the week.
After all, Amazon keeps doing astounding things. We just heard that Jeff Bezos is expanding the pilot Amazon Returns program from 100 Kohl's department stores to the entire 1,100-location chain. Simply bring whatever Amazon ships you by mistake to any Kohl's and they'll send it back to get you your refund. They're advertising it as a Back-To-School convenience . . . parents can buy school clothes and supplies online, try them on and if they don't work, send it all back.
That's obviously a competitive threat to mall stores in categories like Apparel that previously resisted Amazon's disruptive effect. If there's no risk in ordering a lot of clothes and returning what the kids don't fit or like, why not buy online instead of dragging yourself to the mall? In the meantime, Amazon has your money and will keep it for an extra 3-5 days before refunding it, which can generate a lot of cash in an operation this size.
Looking ahead, we're eager to see Amazon reverse the logistics and start bringing merchandise into the stores as well as using the stores as return shipping depots. After all, if the trucks are moving back to Amazon warehouses, they can also move from the warehouses to the stores, loaded with all the packages people have ordered online. In theory, Kohl's becomes the fulfillment partner and showroom, where shoppers can inspect the merchandise, compare floor models and yes, try on the clothes before checking out on the Amazon site.
At that point, Amazon comes full circle with the old Catalog Retail model, with a central inventory of merchandise and a network of showrooms scattered around the country. Come into the store and see the stuff, or stick with the online "catalog" (the site) and have everything shipped to your door. Either way, Amazon wins.
We're eager to see where this goes. However, the difference between what Jeff Bezos is engineering and what his Department Store rivals are doing is stark. Amazon sees this entire Return Department operation as a sideshow. The CEO of Kohl's touts it as her "single biggest initiative of the year."
They're eager to keep people coming into the stores even if it's only to manage their Amazon transactions. If that's as far as their ambition goes, we aren't impressed. You'll notice we don't recommend Kohl's. It's down 29% YTD. Amazon is up 34%.