Welcome to Extreme Investor Network, where we provide expert insights and analysis on the latest trends in investing. Today, we want to talk about the key to this earnings season and why the consumer is at the center of it all.
In the past two years, the U.S. economy has been propped up by a strong consumer base that continued to spend despite inflation and rising interest rates. However, the recent signs of weakness are causing some concerns among investors. Companies like PepsiCo have already reported changes in spending habits, citing shifts in shopper behavior across all income levels.
As we navigate through the choppy waters of the second half of 2024, it’s crucial for investors to pay close attention to consumer behavior. Bill Merz, head of capital market research at U.S. Bank Asset Management Group, emphasized the importance of consumer spending, which accounts for 70% of GDP. The future earnings growth potential of companies will heavily depend on the participation of consumers.
Investors are anticipating a soft landing for the economy, but it’s essential to be selective in picking investments. As consumers become more choosy in their spending habits, companies like Walmart, Target, Kraft Heinz, and Kellanova are seen as buying opportunities. Travel companies catering to higher-income consumers, such as Viking Holdings, Hilton Worldwide Holdings, and Marriott International, are also expected to perform well.
Despite potential signs of weakness, the consumer remains “smart” according to experts. Lindsay Rosner, managing director at Goldman Sachs Asset Management, highlighted the thoughtfulness and specificity of consumer spending decisions. This careful approach is likely to lead to a soft landing rather than a crash.
In a nutshell, the consumer holds the key to the current earnings season and investors must pay close attention to their behavior. Stay tuned to Extreme Investor Network for more updates and insights on navigating the complex world of investing.