Key Points: Over the past year, the market was convinced that higher rates would derail the consumer, but that’s not what happened. The debate is likely to get turned on its head this year – some are suggesting that falling rates will stimulate consumption, but we’re not taking the bait just yet.
Key Points: We’ve been bullish on the consumer for the past two years and at the same time, we’ve been skeptical that the low-end would be able to keep up. Stocks that cater to the low-end have indeed underperformed, and our sense is that investors have written the cohort off as a problem child. We’re starting to see reasons for optimism. Our original concern was that the low-end ran through “excess savings”, but that’s one
Key Points: The auto industry missed out on selling 9 million units over the past few years. The question we have is whether that pent-up demand will ultimately surface, or remain latent. This report assesses demand trends, supply dynamics, and credit conditions with the aim of understanding where the auto cycle is headed. We suspect that usage will factor into the replacement cycle. Miles driven are still (5)% below normal, and by our count, the
Key Points: The consumer has stood strong in the face of meaningful headwinds, and we think they’ll continue to hold up well in 2024. The uptick in credit card delinquencies seems to run counter to our thesis, so the aim of this report is to understand why delinquencies are moving in the wrong direction, and what that might mean for PCE in the year ahead. A little over a year ago, credit card balances eclipsed
Key Points: The housing market is typically the Fed’s most reliable transmission mechanism, and while housing activity has slowed markedly, the tack-on effects have yet to sink the economy or the consumer. Housing is a complex subject, and there’s no shortage of data to analyze. We focus our energies in this report on demographics, the normalization of pandemic effects, spending on home improvement, and the labor market. Housing turnover has reacted to rate hikes much
Key Points: We’ve been bullish on the consumer and that’s created a bias for discretionary stocks over staples. Staples, though, have lagged the market by ~20% over the past year, and the aim of this report is to determine whether it’s time to buy this beaten-down group or if we should continue to tread lightly. The decision to own consumer staples stocks cannot be made in a vacuum. That’s because staples often act more like
We hosted a timely webinar that outlined a few tail risks. Employment growth is being driven by acyclical sectors like government and health care. Both of these are under a microscope. Job gains are heavily skewed to large firms with over 500 employees. That adds risk to the equation. Immigrants have also been driving the train, but for how long? Tail risk is also discernible within PCE. Obscure categories are growing twice as fast as “bankable” categories. Have a listen!
Hal Lawton joins a growing list of CEOs that’ve graced us with their presence. He shared key insights on our podcast. We talked about how a tight housing market pushed Millennials into TSCO’s catchment area. We talked about TSCO’s 7% market share, and the fact that outsized comps were driven by transactions, not ticket. TSCO has no direct peer — that means it doesn’t have to share its slice of the market with “like” competitors or fall prey to their mistakes. Give a listen!
We hosted a webinar to review the state of the consumer and to detail why 2025 might hold a few surprises. We dive into the labor markets with a focus on immigration; we assess the implications of other policies such as tariffs and taxes; we explore household balance sheets to understand how wealth and leverage might influence consumer spending. Our take is that a softening consumer will impact the interest rate environment, and that in turn, can have meaningful implications for stock selection. The slides…
Brinker has been on a tear. Same store sales have been ripping even as other restaurants are struggling. We talk with CFO Mika Ware who has a unique perspective on the company’s turnaround. It’s a classic case of blocking and tackling — slimming down the menu, simplifying recipes, improving standards, and killer marketing that’s informed by insights and data. It sounds like Brinker has more work to do at Chili’s, and it might be able to replicate that success with other banners.
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…