Podcast Summary
Core PCE inflation: The core PCE inflation is forecasted to rise 0.2% for the month but ease to 2.6% annually. Economists attribute the stalled inflation to rents and expect inflation expectations to remain anchored.
This week, the Federal Reserve's preferred inflation gauge, the core Personal Consumption Expenditures (PCE) price index, is set to be released, and it could influence the odds of a rate cut in September. The forecast suggests a 0.2% rise for the month with an annual rate easing to 2.6% from 2.8%. Economists believe that rents are the primary reason for the stalled inflation, and measures of inflation expectations remain anchored. The U.S. economy has experienced a significant slowdown, with Goldman Sachs estimating a drop from 4.1% in the second half of 2023 to 1.7% in the second half of 2024. Despite this, the Fed's target of 2% inflation for the total basket may still be achievable, even if not all components reach that level. Overall, the economic data this week, including the core PCE inflation, income, and spending data, will provide insight into the current state of the economy and the potential for future monetary policy decisions.
Market uncertainty, economic slowdown: The economic slowdown and market uncertainty could lead to decreased business investment and a potential contraction of NVIDIA's stock price-to-sales multiple, while the false sense of security from certain stocks may give a misleading sense of stability.
The economic slowdown is expected to continue, with real income growth softening and consumer sentiment declining. This could lead to a decrease in business investment due to election-related uncertainty. In the equity market, the focus is on NVIDIA, as analysts predict its revenue growth rate has peaked. This could result in a contraction of the stock's price-to-sales multiple, potentially weighing on the stock even if revenue continues to grow. However, the market's false sense of security from the MAG 7, terrible 3, and magnificent 1 stocks may give investors a misleading sense of stability. If breadth begins to broaden out, it could lead to a decline in the equity market as investors shift their focus to other stocks. Overall, it's important for investors to pay attention to the underlying struggles in the market and not just focus on the headline numbers.
Nike earnings, AI integration: Analysts anticipate Nike's earnings report for potential margin improvements and innovation investments. Apple and Meta Platforms discuss AI model integration. Various companies release earnings reports throughout the week, and AMC Entertainment negotiates debt reduction.
The upcoming Nike earnings report is highly anticipated, with analysts focusing on potential margin improvements and innovation investments. Nike's dominant market position, recovering margins, and inventory control make it an attractive entry point for investors, despite near-term headwinds. Additionally, Apple and Meta Platforms are reportedly in talks about integrating AI models into Apple's intelligence, as they aim to catch up to competitors in the AI race. The earnings reports of various companies, including Nike, Beyond Air, Baker to use, Carnival, FedEx, and many more, are set to release throughout the week. Confidential discussions are also underway between AMC Entertainment and its lenders to reduce debt and extend securities. Overall, these developments highlight the importance of staying informed about key earnings reports and industry trends.
Movie theater debt, ROIC outperformance: Movie theater chain faces massive debt, while high ROIC stocks have outperformed low ROIC ones by 2.3% annually since 1978, especially during downturns, with notable high ROIC companies including Alphabet, Ford, Neto, Home Depot, and Caterpillar
The world's largest movie theater chain is facing significant debt issues, with over 4.5 billion dollars in long-term borrowing and over 2.8 billion dollars in maturities due in 2026. Meanwhile, a new study suggests that GLP-1 drugs, used for weight loss, may lower the risk of dementia in older people with diabetes. For income investors, FedEx, Getty, Humana, and Mondalez go ex-dividend this week. According to Bernstein Society General's research, stocks with high return on invested capital (ROIC) have outperformed low ROIC stocks by 2.3% annually since 1978, and even more so during economic downturns. Notable high ROIC companies include Alphabet (ROIC 26%), Ford (PE 23.2), Neto (ROIC 26.8%), Home Depot (ROIC 31%), and Caterpillar (ROIC 22.9%). Join SeekingAlpha's subscriptions for more investing insights.