🗣 What CEOs Are Saying About the Economy

What’s on the Menu 🍴

What’s missing in today’s economic landscape isn’t always obvious…

So today, we’re diving into what REALLY matters to help us guide our investing decisions.

• What CEOs Are Saying About the Economy 🗣

• What Everybody's Missing About Bitcoin ₿

• Have Investors Gone Soft, Or Is Panic Justified? 😲

• Stock Market Crash Explained 📺

Today’s newsletter is a 5 minute read.

What CEOs Are Saying About the Economy 🗣

In the wake of last week’s higher unemployment numbers, stock markets are worried about a softening economy.

We’ve been sifting through scores of Q2 earnings reports and conference calls to see what corporate executives are witnessing on the front lines.

Are investor fears of a weakening economy justified?

The short answer seems to be YES.

However, the longer answer is that while many companies are seeing some softening in spending, it hasn’t yet been enough to turn growth from positive to negative in the broader economy.

And some companies are still enjoying robust revenue and earnings growth.

In fact, the projected Q3 earnings growth rate for the S&P 500 stands at +6% as of this week:

Here’s some of the notable economic & consumer focused commentary from major companies’ Q2 earnings conference calls:

Visa

“In the U.S., while growth in the high spend consumer segment remained stable compared to prior quarters, we saw a slight moderation in the lower spend consumer segment”

Amazon

“We're seeing lower average selling prices or ASPs right now because customers continue to trade down on price when they can”

JP Morgan Chase

“You can see a little bit of evidence of behavior that's consistent with a little bit of weakness in the lower-income segments, where you see a little bit of rotation of the spend out of discretionary into nondiscretionary”

Starbucks

“We continue to navigate through a value-driven consumer environment”

Uber

“While our consumers tend to be higher income, we're not seeing any softness or trading down across any income cohort”

Airbnb

“We are seeing shorter booking lead times globally and some signs of slowing demand from U.S. guests”

PayPal

“We see the U.S. environment being very consistent right now with what we've seen over the first half. International is a real strength for us”

McDonalds

“We warned of a more discriminating consumer, particularly among lower-income households. And as this year progressed, those pressures have deepened and broadened”

DoorDash

“We're seeing really strong demand on the consumer side. So we're not actually seeing some of the challenges that you may be hearing about or reading about in other headlines”

Block (Square)

“Strength from our markets outside the U.S. was offset by a continued moderation in U.S. same-store sales growth, consistent with broader macro data points”

Wayfair

“Customers remain cautious in their spending on the home”

Simon Property Group

“The lower income consumer has been under pressure for quite some time…We haven't seen a slowdown in the higher-end consumer”

Clearly some companies are struggling more than others, and some consumers (notably lower income groups) are struggling more than others.

Is an economic soft landing still possible if inflation keeps slowing and the Fed delivers interest rate cuts later in the year?

Only time will tell…

What Everybody's Missing About Bitcoin ₿

The OG trader, Jesse Livermore once said:

"The game of speculation is the most uniformly fascinating game in the world but it's not a game for the stupid, the mentally lazy, the man of inferior emotional balance, or the get-rich-quick adventurer."

This quote encapsulates the essence of trading and investing, especially in the volatile world of Bitcoin.

Bitcoin isn't just a digital currency; it's a high-stakes game where every decision you make is based on incomplete information about an uncertain future.

Bitcoin recently experienced its first 30% pullback in the current bull market, and the reactions were mixed.

According to my Twitter survey, 56% of respondents were "chilling," about a third were buying, and a little over 10% were panicking.

This reaction highlights a key aspect of successful investing: managing emotions.

Fear and greed often drive market prices, and understanding these emotions is crucial for making rational decisions.

When the market crashed, headlines blamed everything from the unwinding of the Japanese Yen trade to recession fears.

But these narratives often miss the bigger picture. The market's recent pullback is a natural part of its cycle, a necessary correction in a long-term upward trend. Historical data shows that as bull markets mature, larger pullbacks become more common.

In previous cycles, Bitcoin saw multiple pullbacks of over 30%, which are now expected as part of its growth trajectory.

One critical question every investor should ask is: what emotions are driving the current market price?

The recent fear-driven sell-off was a perfect storm of market sentiment, amplified by sensationalist headlines.

But for seasoned traders, these moments of panic are opportunities. It's about managing your positions to minimize risk and avoid being swayed by market hysteria.

The correlation between Bitcoin and traditional markets, like the NASDAQ, also plays a significant role. During periods of market panic, correlations can increase, causing simultaneous sell-offs across different asset classes.

However, this also means that rebounds can be equally synchronized. For instance, when US markets opened recently, both Bitcoin and stocks immediately caught a bid, reversing the overnight panic.

Investing in Bitcoin requires a blend of technical analysis and emotional intelligence.

Recognizing your biases, whether overly bullish or bearish, and questioning the popular narrative can provide a clearer view of the market. Despite the noise, the fundamental bullish case for Bitcoin remains strong, driven by its inherent properties and growing acceptance.

In the end, it's not about predicting the market with perfect accuracy but about positioning yourself in a way that you can manage any outcome.

As Livermore suggested, this game is not for the faint of heart but for those who can navigate their emotions and maintain a clear, strategic perspective.

So, what are you missing about Bitcoin?

Perhaps it's the realization that the real game is mastering your own mind.

Have Investors Gone Soft,
Or Is Panic Justified? 😲

The Federal Reserve has two jobs:

1. Price stability (inflation)

2. Stability in employment

It’s clear the Fed has tamed inflation and the disinflation trend continues.

However, now, we have the labor market to worry about.

As the unemployment rate has increased to 4.3%, it’s now above the longer run targets that the Fed had in mind. Whoops.

This is what lead to a major selloff in stock indices over the weekend and now has the fear and greed index in max fear territory:

Keep in mind, the S&P 500 and Nasdaq are actually STILL showing positive gains on the year (especially after the big bounce):

So, have investors just gone soft and and unable to handle volatility, or are risks really becoming something to worry over?

Risks ARE building. However, there could be some ways that the economy doesn’t fall into a deep recession.

We have to remember we can have a full blown recession, and we can also just have economic weakness without a recession. This is the big question now.

The kicker that could save us all, is interest rates coming down.

The Fed has at least done a good job leaving themselves a lot of room below. They have plenty of space to cut rates if the economy deteriorates too much.

The flip side of this, is lower rates may also buoy some of the weakness.

I’ve also referred to it as the seesaw effect as one side becomes heavier, while the other is lighter, balancing things out.

The housing market coming back online could help save the economy and keep it floating above water. Many areas of consumer discretionary categories have slumped. Walmart and Target have showed us this.

However, more home buying could help other areas of discretionary spending like home goods and bigger items like furniture. (Hello Home Depot and Lowes.)

Those consumers with variable debts like credit cards and HELOC’s (home equity lines of credit) may also get some help here.

Of course, if people are unemployed then no one will be buying homes and it’s a moot point. However, sentiment here isn’t that negative yet with the current economic data.

Even initial and continuing claims for unemployment aren’t in terrible territory and are trending close to pre-pandemic levels.

You’d think investors saw the risks of correction coming with higher stock index valuations! Price in the S&P 500 and Nasdaq hasn’t had a deeper correction in a while.

We will continue to monitor the data, but, it’s possible investors may just be looking at a garden variety stock market correction after years of very strong performance.

Video of the Day:
 Stock Market Crash Explained 📺

Monday we woke up to the markets in turmoil...

And as usual, Nikki dives into the data and let you know what you should and shouldn't be concerned about.

Check out today’s video here

Food For Thought 🧠

“An Investment in Knowledge Pays the Best Interest”
- Benjamin Franklin

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.