Consumer Spending: Are Consumers Tapped Out or Pushing Back?
Key Summary:
Sentiment towards the consumer and spending is about as negative as I’ve seen.
Assets...
Could there be a better core than the global consumption theme? Global consumer spending is 60% of the world’s $100 trillion GDP or $60 trillion per year.
Could there be a better core than the global consumption theme? Global consumer spending is 60% of the world’s $100 trillion GDP or $60 trillion per year.
Key Summary:
• Chart of the Week: The market is not as expensive as the media describes it.
• Brand update #1: Live Nation – robust demand continues & the stock is on sale.
• Brand update #2: Uber – strong trends and the shift to profitability continues.
We know intuitively, buying great merchandise on sale is something consumers love. Ironically, in the investment business, when great stocks go on sale, investors tend to freeze or sell. That’s a mistake.
Aggregate spending is a bit above the long-term trend, so we expect the spending dynamic to change as consumers continue to make important choices. As personal income goes positive as inflation cools over time, positive spending and saving dynamics will emerge.
October was marked by continued volatility across fixed income and equity markets as investors faced various challenges, including persistent inflation concerns, rising yields, tightening monetary policy, and the backdrop of a U.S. Presidential election.
As an investor, it’s nice to know what we should expect from President Trump, because we have seen the movie before in 2017 – 2021. Apart from the early part of the Pandemic period, the economy and stock markets generally performed well.
Remember, our investment in stocks is a De facto vote of confidence on the economies in which we invest. Earnings, revenue, margins, free cash flow, and the growth of these important metrics is what drives stocks up or down over time.
The discretionary sector struggled as did all growth and quality-oriented areas of the market in 2022. That was a classic re-set and a raging opportunity to add exposure.