Strong Growth
Consumer and business spending remain healthy
Summary: Earnings season continued last week, and growth rates were a standout feature. Whether it’s 17% revenue growth at Visa, 33% revenue growth at Meta, or 10% growth at Coca-Cola, the numbers are quite strong across a variety of industries. Some of this growth is very likely explained by persistent underlying inflation. Markets are expecting Kevin Warsh to be more dovish, but there are signs that the Fed is turning more hawkish and multi-polar.
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Macro
Consumer and business spending remain healthy
“Looking at the macro picture, the economic foundation remains generally supportive with healthy underlying consumer and business spending....Net revenue growth was up 12% and net income up 15% in the first quarter “ - Mastercard (MA 0.00%↑) CEO Michael Miebach
“Growth across consumer spend band saw incremental improvement from Q1, with the highest spend band continuing to grow the fastest. Across our volume, both discretionary and nondiscretionary spend remains strong. We do not see signs of the lower spend consumer weakening in our volumes...In our fiscal second quarter, net revenue was up 17% year-over-year.“ - Visa (V 0.00%↑) CFO Christopher Suh
“...the economy has been resilient. It really has, not just this time, but it’s been remarkably resilient for some years now. The U.S. economy has just powered through shock after shock, and consumers are still spending. And that’s what the banks will tell you, credit card companies will tell you, the retail sales numbers that we got most recently. People are still spending.” - Federal Reserve Chair Jerome Powell
But inflation hasn’t gone away
“Estimates based on the consumer-price index and other data indicate that total PCE prices rose 3.5 percent over the 12 months ending in March, boosted by the significant rise in global oil prices that has resulted from the conflict in the Middle East. Excluding the volatile food and energy categories, core PCE prices rose 3.2 percent over the 12 months ending in March. This relatively high rate largely reflects the effects of tariffs on prices in the goods sector.” - Federal Reserve Chair Jerome Powell
“ I’m gonna put the probabilities [for higher inflation] as higher than the market thinks. My view is that there are a lot of inflationary things out there, including the Iran war, the re-militarization of the world, the infrastructure needs of the world, um, and our deficits.” - JPMorgan Chase (JPM 0.00%↑) CEO Jamie Dimon
Jerome Powell gave his last press conference
“Anyway, thank you very much, everyone. (Applause) (Laughs) I won’t see you next time. (Laughter)” - Federal Reserve Chair Jerome Powell
But he will stay on as a governor
“After my term as chair ends on May 15, I will continue to serve as a governor for a period of time to be determined. I plan to keep a low profile as a governor. There is only ever one chair of the Federal Reserve Board. When Kevin Warsh is confirmed and sworn in, he will be that chair. Once sworn as board chair, his new colleagues will elect him to chair the FOMC as well.” - Federal Reserve Chair Jerome Powell
We could see a more multi-polar Fed
“Our decisions reflect the collective judgment of the Board of Governors and the Federal Open Market Committee – colleagues who demonstrate analytical rigor, principled judgment, and a genuine commitment to the public interest...You saw that three people dissented over the language. I think all of those people agreed with the right decision.” - Federal Reserve Chair Jerome Powell
FOMC members have turned slightly more hawkish
“I would say that the, you know, number of people on the Committee who either could support that language change changing to a more neutral stance so that the hike is as likely as a cut, that number has increased over the intermitting period. And it’s easy to see why.” - Federal Reserve Chair Jerome Powell
