Bold choice, considering you're the one who has been wrong about the tariffs this entire time.
I'm hunting for signs of "consumer rot" to support a view that the stock market has gotten ahead of itself.
I haven't found any, helping to explain why stocks are at records. As goes the US consumer, so goes the economy and the stock market! Or so I was told by my former boss 20 years ago during an office all-nighter.
"I think people just want to live their lives, and that's what they're doing," American Express (AXP) CEO Stephen Squeri told me over the phone on Friday. "I mean you're seeing a little less air travel, obviously, but people are still spending, and they are still traveling."
This came after the company posted a big second quarter and left its full-year outlook unchanged. Amex saw record card spending in the quarter.
I continue to marvel at the strength of Amex every quarter, but maybe I shouldn't — it's one of Warren Buffett's oldest and most storied investments, right behind cane sugar soda-selling Coca-Cola (KO).
Elsewhere, consumer rot is failing to pop up.
Netflix (NFLX) called out "healthy member growth" as the key driver of its better-than-expected growth in the second quarter and guidance lift. The company has raised prices, and yet consumers haven't even blinked. Bring on "Happy Gilmore 2" on July 25!
PepsiCo (PEP) CEO Ramon Laguarta told me by phone this week that consumers are responding to more affordable package sizes for beverages and snacks. Not exactly a ringing endorsement of consumer health, but shoppers seemed to be shunning those more affordable sizes last quarter.
June retail sales data came in better than expected. I liked that the gains were dispersed across general merchandise stores and personal care stores.
United Airlines (UAL) CEO Scott Kirby slipped in this comment on his earnings call this week: "Demand was weak for the last five months due to high levels of uncertainty for both businesses and consumers. I'm sure that's not a shocking thesis, but in the past few weeks, the level of uncertainty has declined. The tax situation is settled after the reconciliation bill passed. The geopolitical situation in the Middle East appears to have stabilized. And while tariffs are not yet certain, I think the market and most businesses have a much better read on how they'll manage in a narrower range of outcomes."
"And encouragingly, that higher level of certainty has translated into a meaningful inflection point in demand," he added.
For now, consumers appear to be handling tariff-related pricing hikes in stride. Surprising? Sure. But it's happening.
"In the simplest language, the pig is coming through the python, but it's taking a lot longer to absorb the pig here," Apollo chief economist Torsten Sløk told me. "And maybe the negative effects of that trade war shock that we all have worried so much about, it's just going to take longer to play out." (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
"The remarkable resilience of the economy that we've seen, especially here in the last few weeks, just continues to be very positive and very good," he said.
Bottom line: As long as the consumer isn't rotting away, it will be hard to answer the phone calls of the bears. Trek on, bulls... for now.
By
krom ·
