Stealing Alpha
The debate over the value of AI to enterprise is back in the spotlight
Summary: Newsflow has been light over the last couple of weeks due to the July 4th holiday. The debate over the value of AI is starting to boil.
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Macro
Consumers remain resilient
“Our consumer continues to be resilient as reflected in another quarter of strong results. It’s broad-based across channels, geographies, and categories.” - Levi Strauss (LEVI 0.00%↑) CFO Harmit Singh
“We’ve seen very resilient consumer spending numbers. That’s another way of saying that through the shock, the consumer has held up a lot better than most were expecting” - PGIM High Yield Bond Fund (ISD 0.00%↑) Chief US Economist Robert Sockin
The US is somewhat shielded from a global energy crisis
“So, why have we seen all-time highs in the S&P while there’s a war in the Middle East? Number one is the United States is somewhat shielded from the energy crisis that this war is creating.” - Citadel Founder Ken Griffin
Lower-income households are seeing a rebound in wage growth
“Lower-income households saw a rebound in after-tax wage growth, rising to 4.1% YoY in June, above middle-income households (3.4%) and nearly matching higher-income households (4.2%). Increased job switching activity, particularly among lower-income workers who tend to receive larger pay gains when changing employers, could be helping narrow the wage growth gap.” - Bank of America Institute Economist David Tinsley & Economist Joe Wadford
But there is still pressure
“What we are anticipating is that as we go into this new fiscal year, the consumer is going to continue to be pressured. And we do expect to see them continue to change their behavior because of that, being more deliberate in how and where they shop, buying more on promotion and less on everyday prices, making trade-offs between pack sizes and channels, all with value at the forefront.” - General Mills (GIS 0.00%↑) COO Dana McNabb
“The consumer remains under pressure, and we’re managing through a more volatile cost environment.” - Helen of Troy (HELE 0.00%↑) CEO George Uzzell
It’s a K-shaped economy
“And look, we talk a lot about K-shaped economy, and you also see sort of K-shaped consumer behavior, right? So you’ve seen that behavior, which I think is a value-driven behavior. You’re seeing other parts of the K where it’s sort of, I want a great premium product, like think about what’s happening in Corona non-alc where we’ve got very strong double-digit growth, no alcohol, right? It’s about: I’m willing to pay more to have a very premium experience with a great-tasting liquid. And so you’ve seen -- we continue to see that both ends of that K.” - Constellation Brands (STZ 0.00%↑) CEO Nicholas Fink
“...what we’re being really smart about is making sure that we understand how stressed the consumer is going into this fiscal year, that we don’t take that for granted and that we make sure that we’re bringing the right value. And then, as you said, there is a portion of the economy in this K economy that will spend more.” - General Mills (GIS 0.00%↑) COO Dana McNabb
