Shares of US automakers are set to rise as investors are awaiting the May sales data, expected to touch record levels. Car buying platform Edmunds.com stated that a seasonal-adjusted rate of 17.4 million is expected to match the estimated sales of 1.6 million new cars and trucks in May.
Chief investment strategist David Kudla of Mainstay Management in Grand Blanc, Michigan stated that the May sales is getting closer to $40 billion, and added that May 2015 appears to become one of the best months ever. August 2014 marked the record sales of $40.3 billion. In April, weak auto results lead to low overall retail sales, but it is set to rebound in May.
Senior analyst at Edmunds.com in Santa Monica Jessica Caldwell said that the timing of the Memorial Day holiday was another big factor in the jump in the car sales. The demand for sports utility vehicles and trucks were driven by the low gas prices. Caldwell added that the full week of May after the holiday weekend proved to be an advantage for shoppers to take advantage of the deals, communicated in dealer and automaker marketing messages.
Chief investment officer Jack Ablin at BMo private bank in Chicago said that credit for auto loans has seen expansion, helping the sector to grow. Ablin mentioned that the strong dollar caused a “headwind,” and GM recalls, but he expects the growth in auto sales to continue. Currently, GM and Ford appear undervalued at current levels: GM’s price-to-earnings ratio stands at 7.62, way below the S&P’s ratio of 17.4. Ford’s P/E ratio stands at 9.77, according to Thomas Reuters data.
Though the rise in shares caused by the sales is expected, it could be a bad new for the wider market as any sign of consumer strength could push the US Federal Reserve to raise the interest rates. Analysts expect that the hike could come later this year, but it remains unclear if it would happen in September or December.