Yep, Moody’s is back with its downgrade of US credit (down to negative from stable), with the government facing another shutdown. Very large fiscal deficits. Partisan gridlock. The terrible opening weekend of “The Marvels” movie. Too many pumpkin-flavored drinks. OK, maybe not all those reasons were given.... You’re probably sick of seeing this on the telly, so I’ll stop here.
Investors have a few things to focus on this week, including Tuesday’s US consumer price data. We’re expecting inflation to ease a bit. This month, 10-yr UST yields declined to 4.63%, down ~30 bps this mo. Money markets are expecting a cut, yet economists are singing a different tune with sticky inflation. Sell-side firms hold divergent views on Fed rate cuts bets as well, which depend on the rate of inflation declining and the economy weakening, per Bloomberg.
GS is telling investors to stop worrying so much about lower US profit levels, per Bloomberg. They expect a solid investment landscape next year, although they think it will take a while to get rate cuts. Morgan Stanley moved from bear to bull as well, expecting US stocks and bonds to outperform EM peers next year, per Bloomberg, as well as central bank rate-cutting starting in June.
Is it too early to start making market calls on 2024? MS did it anyway. Slower global growth, fighting inflation, policy rates pretty much unchanged early in the year with cuts mid-year, Japan raising rates mid-year, US better than EM, a strong US and yen, fixed income a good choice, and a defensive equity approach recommended.
Markets are higher. Hang Seng +1.30%, Shanghai +0.25%, Shenzhen +0.10%, ChiNext +0.20%. The gov will add more liquidity support given the cash squeeze, per Bloomberg. Boeing may be a beneficiary of the Xi/Biden meeting this week with new purchases of the 737 Max jetliners and an agreement not to use AI in autonomous weapons. Boeing is already riding high with a $52bn deal with the Emirates reported.
JPM is out with a report on EZ Staples companies, saying that the China consumer will still suck wind in 2024, so recent challenges could continue. If you watched stock price declines after earnings reports from beauty and spirits/beers (e.g., EL, Diageo), you’ll know what I’m talking about. There have been some beneficiaries of trade-down types (BUD APAC), but that only gets you so far when folks are worried about their jobs.
GA is going long hipsters with mustaches with a deal to acquire control of Joe + the Juice and its $9 juices. Valedo Partners, a Swedish firm, is exiting at a $600mm valuation. LPs should wonder what GA can do with this asset in a higher rate environment that Valedo couldn’t. And when will people realize that they can squeeze their own juice?
BBG has a piece that says the typical US homebuyer is (i) increasing female versus male, (ii) increasingly single versus couples, (iii) more likely to pay cash, (iv) making $107k/yr up from $88k a year earlier, and (v) 35 for a first house versus 29 back in the early 80’s. Over 80% of US homebuyers are White. Folks are staying put for longer in their homes too.
