After turning more cautious on the consumer, we’ve received a lot of questions from clients. This report seeks to address those queries while adding a healthy dose of micro analysis to our macro call. We share updated thoughts on autos, RVs, housing-related stocks, staples, and leisure. We also dig into historical return profiles of consumer stocks.
Key Points: Our optimism for the US consumer has been well placed. The consumer has been remarkably resilient over the past few years, largely due to strong labor markets and bulletproof balance sheets. The current year is off to a good start, but as we peer into 2025, we expect spending to slip into a lower gear.
Key Points: The low-end has been struggling for a while, but recent commentary from McDonald’s, Dollar Tree, Five Below, and others has fueled investor concerns. The aim of this report is to add clarity to the debate, and to determine whether a bet on the low-end makes sense.
Key Points: When it comes to the consumer, market participants spend a lot of time and energy studying the demand side of the equation. Supply dynamics often get short shrift. In this report, we analyze the supply of labor, the supply of fixed capacity, and the supply of inventory. Understanding the supply side can also tell us something about where inflation is headed.
Key Points: There were more than a few landmines in the consumer sector during Q1 earnings season, and lately, it’s been bellwether stocks like Starbucks, McDonald’s, Nike, and Lululemon that’ve been sounding the alarm. The aim of this report is to understand whether Q1 results signal a softening consumer, or if the issues are idiosyncratic in nature.
Key Points: The gig economy remains a mystery. It’s estimated that 25% of the population participates in informal work, but their efforts are not captured in official statistics. If they were, employment would be higher by as much as 4%. The gig economy has spawned some interesting business models like Uber and DoorDash. This report offers a perspective on those platforms and compares them to other delivery-based models, including Dominos, Amazon and UPS.
Bill Rhodes led AutoZone for nearly 20 years. Over that time, the auto parts industry faced major change — auto cycles have come and gone, the industry has consolidated, e-Commerce has altered the landscape, and vehicles have become laden with technology. So far, it seems that the more things have changed, the more they’ve stayed the same — AutoZone has remained relevant to its customers and its business model has stayed the course. More change is on the horizon — EVs are making inroads, etc. …
Friday’s revision to income and spending data has caused confusion. We’ve prepared a 10-minute podcast to review the investment implications. Some of the changes can be disregarded as noise, but there are three important takeaways. First, the latest iteration of personal income is highly disconnected from labor market data. Second, this is not the first time savings rates have been meaningfully revised, nor will it be last. Investors should move on from using the savings rate as an investable data point. Household balance sheets are…
Yesterday, we caught up with Carol Tome, the CEO of UPS. We covered a lot of ground … as UPS typically does! We talked about the state of the global supply chain, the shift between goods and services, the de minimis rule, tariffs, UPS’ relationship with Amazon, the labor market, driverless vehicles, drones, AI, and more. Click the link to view our 20-minute interview. So far, we’ve hosted the CEOs of Delta, Home Depot, and UPS. There’s more to come. Sign up for our podcast…
We’ve been getting a lot of questions from clients about the low-end consumer, so we assembled a deck of charts to walk through the pros and cons of betting on the low-end. There are a lot of variables to consider, and we walk through a chunk of them on this podcast, including job-finding prospects, wage growth, SNAP benefits, tariffs, interest rates, and stock price performance. As always, feel free to reach out with questions.
We hosted a webinar reviewing the changing landscape for the US consumer. We are entering a new phase and see weaker spending growth ahead. This has significant implications for portfolio weightings. We have lightened up on our exposure to leisure stocks and are instead recommending clients over-weight rate-sensitive durables like housing, autos, and RVs. We assess the odds of a recession emerging and take questions from clients.
Today we caught up with Ted Decker, the CEO of Home Depot. We talked about the health of the consumer, the state of the housing market, the “lock-in” effect, AI, and more. I asked how long the hangover in COVID-friendly categories like BBQ grills, outdoor furniture and washing machines might last. He compared the dynamic to a hurricane, which made a lot of sense to me. Home Depot has seen plenty of hurricanes over time, and they’re using those experiences to inform buying decisions. This…