Market pundit and CNBC “Fast Money” contributor Jeff Macke has been following and analyzing the financial markets for more than 25 years. In addition to keeping a watchful eye on the latest macroeconomic trends, he tends to be more focused on individual stocks and their investment cases. He joins the ETF Think not to discuss ETFs, but to talk about the market’s most talked about stocks and where they might be headed.
With the Fed now being down to potentially only 1-2 rate cuts in 2024, is QT the only thing that slows this economy down? In Macke’s opinion, it’s the direction and perception of what the Fed is doing that’s important as opposed to what they’re actually doing. We all thought there would be multiple cuts because inflation was back under control, but that environment is gone. Everyone sweats their own situation, but Macke has noticed that consumers are either spending full price or no price at all. He thinks discounts just don’t matter anymore and uses Lululemon as an example of a company that doesn’t need to advertise discounts to be successful. Does that make it a stock you want because they can go gangbusters even with no discounts? Not necessarily.
In general, Macke feels that the U.S. consumer is doing relatively well, but the low end is feeling a pinch. There’s always been this sense that the consumer is going to collapse, but that hasn’t been happening. If we get to the point where it costs $100 to fill up your tank, then we’ve got big problems. He acknowledges that people are dialing back on discretionary items, but things, such as Wrestlemania, the UFC and Costco, are good indicators of consumer spending on the lower end and those have been doing pretty well. Macke believes that the sky isn’t falling though and that if people are spending $1500 on Taylor Swift tickets, it can’t be that bad.
Netflix just recently released its Q1 earnings results. Macke noted that the overall results were pretty good and the stock in the past might have popped on those results alone, but guidance was weak. Essentially, Netflix is becoming a slowing growth company that won the streaming wars and, being a slowing growth company, valuations become more of a concern. He says that people are pulling back on spending, so the market reaction to the news was reasonable. Tech stocks were on a heater in Q1 thanks to the Fed and that was due to be dialed back anyway.
Apple is another stock that gets a lot of attention. Macke sees a company that’s actually starting to lose a little market share, but that doesn’t mean the company is in trouble. Apple and Amazon, in particular, have literally created money spigots via the services they offer, such as Amazon Prime, and that gives them both flexibility and a wealth creation funnel. A lot of people, however, are buying stocks for the narrative, not necessarily the financials. People are buying based on pure FOMO. The magnificent 7 stocks need a break or at least a time out. Macke thinks that they need to get out of the headlines and people need to stop talking about them constantly and give them a break. At that point, maybe you can sniff around again.
Is there any value in the market today? Macke says that he looks at Nike and sees them losing share, which makes for a great opportunity for competitors, such as Adidas. Taking market share works as a tailwind because you can make money on just that. He also likes Dick’s Sporting Goods, but they get 25% of revenue from Nike, so there’s some potential issues there. More broadly, Macke says he’s out on companies that are complaining about the weather and things like that. Take a look at their competitors instead.
Other key takeaways:
- The economics of work-from-home has changed things. It’s affected the economies for anything tied to office work – cars, homes, lunches, business attire, etc. – and it muddles the employment picture.
- A lot of restaurants can’t deal with paying employees $20 an hour. It’ll eventually speed up technological advances, but the economic model needs to be rethought. As long as the labor market is good, it’s not as big of a problem. As it weakens, it might become a bigger issue.
- People are comfortable with cash right now. If someone is getting a risk-free 5%, they’re usually pretty happy about that. What will it take to move back to equities? There’s a lot of canaries in the coal mine in retail. There aren’t necessarily a lot of compelling stories, especially in retail, that are going to pull people off the sidelines.
- Macke isn’t averse to short selling, but he does think the short side is played out. The shorts get crowded and he doesn’t see a lot of opportunities right now. Even the ones he’d be interested in, you might have trouble borrowing the stock or it’s too expensive.
- Temu is really interesting, but the 3-week delivery is going to be the big hill to clear. A lot of people will prefer Amazon at a higher cost because of the next day delivery.
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