'Somebody forgot to tell the boat industry' about inflation, the bear market, and recession fears

There could be a lot more skippers out on the open water this summer despite conditions on dry land being one of red-hot inflation, plunging stock prices, and rampant recession fears.

"While big-ticket consumer discretionary has been left behind by investors, somebody forgot to tell the boat industry," Citi analyst James Hardiman wrote in a new note to clients. "Our channel checks of more than 30 North American boat dealers suggest an acceleration in sales and other leading indicators as weather improved during the month of May."

Hardiman's dealer contacts report sales increasing by mid to high-single digit percentage rates over the past month compared to 2019 despite "significantly" low levels of inventory.

"While dealers share some concern about the health of the economy and consumer, thus far the only near-term headwinds to demand have been weather and product availability and sales have been strong when either have improved," Hardiman said. "Dealers continue to clamor for more inventory and believe that sales would be higher if they had it, as has been the case for the better part of the past two years."

Go figure, especially as companies such as Target and Walmart warn about a consumer spending slowdown and stocks are in a bear market as measured by the S&P 500.

And as for commoners out there, essentials such as gas, groceries, and housing are among primary concerns — not registering a new $1,000,000 boat.

"By segment, demand remains hot for larger, higher-priced boats, particularly outboard models," Hardiman noted. "Unfortunately, these are also the hardest to come by (notably fiberglass outboard boats) and most popular Sea Ray and Boston Whaler models are sold out well into 2023 and beyond."

The Federal Reserve hiked interest rates by 75 basis points on Wednesday in a bid to slow extreme levels of inflation. By its own admission, the Fed is moving into a "moderately restrictive" era of policy that could weigh on the health of the job market at time when many households are increasingly struggling.

"Recession odds always rise with higher oil prices," Jefferies warned in a new note. "If the Federal Reserve is intent on suffocating inflation, then the chances of a monetary overkill — the worst case scenario for equities — will be played out in credit markets."

Apparently these real word concerns haven't made it those sipping mimosas on the sun deck. We suspect they will very soon.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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