Consumers make up the bulk of the economy. And they continue to spend, which is a healthy sign for most companies overall, and for a stock market likely to trend higher. There are a few warning signs, however, like a drawdown in savings, and a rise in credit card balances.
For now, it’s clear from corporate earnings that current debt levels look sustainable. Delinquencies have started to rise, but are not yet at a crisis point.
That suggests investors may have some more upside ahead with companies such as American Express (AXP).
They’ve noted record levels of card member spending, but also tend to cater to higher-income individuals. That development allowed them to beat on earnings, although markets sent shares down initially.
American Express is a leader in the credit card space, and shares now trade at 21 times earnings, a fair price for a great business. And with revenues still trending higher, shares likely have more upside ahead.
Action to take: Shares have been in a strong uptrend over the past year, and the post-earnings selloff has taken shares slightly off their recent highs. Investors can likely see further gains in the months ahead.
At current prices, American Express also pays a 0.9% dividend.
For traders, the April $330 calls, last trading for about $10.60, could see mid-double-digit returns or better as shares shift back to their long-term uptrend over the coming weeks.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.