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The market's recent turmoil has left many investors on edge, questioning the resilience of the US consumer. As we dive into this earnings season, the clues lie in the numbers, and the story is far from over. Let's unravel what the numbers are telling us about the wallet of the average American.
Is the US Consumer Feeling the Squeeze?
McDonald's, the burger behemoth, reported a surprising decline in quarterly global sales. This is a wake-up call, indicating that even the most budget-conscious consumers are tightening their belts. But what does this mean for the US economy at large?
Joining us is Keith Gangle, a seasoned portfolio manager at Gradient Investments, to shed light on these developments.
McDonald's Miss and the Consumer's Dilemma
McDonald's earnings and revenue estimates missed the mark, sending the stock tumbling down 15%. The company's strategy to lean on value meals to entice customers back is a clear indicator of the financial strain on the average consumer. But Keith sees this as a "compelling opportunity" to invest in McDonald's, citing its low price-to-earnings ratio and the likelihood of a rebound.
Coca-Cola's Sweet Spot
On the flip side, Coca-Cola, seen as a defensive stock, reported a 9% growth in sales, signaling that even in tough times, consumers still reach for essentials. This is a encouraging sign for the company, especially if the consumer market continues to soften.
Tech Earnings: The Next Chapter
As Wall Street braces for a week of tech earnings, expectations are mixed. While Google's earnings were in line with expectations, the stock took a hit. Keith and his team are looking for strong reports from Apple, Microsoft, and Meta, but the question remains: will these reports meet the high bar set by the market?
Rotation in the Markets: Tech to Small Caps
The rotation from tech to small-cap names has been nothing short of dramatic, with small caps up 10% in July alone. Keith believes this trend could continue, though not at the same pace. However, if the big tech names report favorably, we could see a shift back to these mega caps.
The FOMC Meeting: A Cut in the Offing?
The Federal Open Market Committee's meeting later this week is under the microscope. While no one expects a cut this meeting, the signals for September are strong. Bonds are becoming an interesting option as rates are expected to go lower, providing a tailwind for the bond market.
What's Next for the US Consumer?
As we await the next round of earnings and the outcome of the FOMC meeting, one thing is clear: the US consumer is at the heart of the market's story. Will the economy continue to move forward, or will the struggles of the low-end consumer slow down the pace? Stay tuned.
Join us as we continue to explore the intricate dance between consumer behavior, corporate earnings, and market trends.
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