Part 10, retail sales, of my “All Else” series is a no-brainer. Why would I, an investment consultant, concern myself with retail sales, or, let’s say, consumer spending habits? It’s because consumer spending accounts for two-thirds of gross domestic product (GDP). Tracking the surveys that track consumers goes a long way toward shaping one’s expectations with regard to the economy going forward.

You may have caught my more optimistic tone (economically-speaking) these past few weeks. Although my optimism has had more to do with the outlook for business investment than it has the readings on consumption. The latest retail sales numbers (reported by the Census Bureau) showed a roughly 4% year-over-year increase. That’s certainly okay, but it’s still not a level that screams expansion. I also track the weekly chain store sales report, and this week’s showed a nice acceleration as well.

I’m guessing we’ll see retail sales pick up some real steam as this year unfolds. Why? Because as businesses finally unleash some of their liquidity and invest in capital goods—i.e., expand—we should see the employment picture improve markedly. And that means better retail numbers going forward. In fact, we’re already beginning to see it. Personal real income is on the rise—this week’s reading from the Bureau of Economic Analysis (BEA) showed a .4% monthly increase and a 3.5% jump year-over-year (those are good numbers), although that same survey had overall consumption down a bit, hmm. And to top it off, consumer confidence is improving, and weekly first time unemployment claims have run at a relatively low rate the past couple of months. You can see why, all things considered, I remain bullish on economic growth going forward.

So does my new-found optimism about the economy mean I’m crazy-bullish on the stock market this year? Not necessarily. Like I said the other day, since 2013 was such a crazy good year for stocks, amid a very slow expansion, a pickup in growth this year only validates those gains. Not that stocks can’t go higher—based on the market sentiment indicators I track, lots of folks are betting on it—it’s just that the economy needs to show sustainable growth, leading to increased corporate profits, to bolster the market against the inevitable headwind of higher interest rates as the economy treks into the later stages of expansion.

So what can go wrong? Well, as I just suggested, no sustainable pickup in growth would bode poorly for the stock market. And, if we do get the growth, higher interest rates can be messy. And of course the geopolitical (read Iraq and Ukraine) is always a concern. And those vote-garnering initiatives—while politicians play the envy card—can do a real number on business sentiment. Meaning, the target is on the back of business. The consistently reported (by business owners) drag on business has been uncertainty over regulations and taxes. And no one knows the magnitude of the inevitable unwinding that’ll occur when the world assesses the distortions created by the past few years of artificial signals sent by the Fed. Beware of bonds, for sure…

And, lastly, a heads up: I suspect next week is going to be super ugly for stocks. Why? Because I’ll be on vacation—it always seems to work out that way. Well, actually, not always. It’s just that I have vivid memories of those vacations when the market was tanking. If it does, or if it doesn’t, I’ll have a connection. Which—good or bad for you—probably means your inbox will receive a message (or two) from me while I’m away…