Financial News

The main concern for the global economy at the moment is whether or not the United States can continue to support other economies. As we head into the month of February, it is worth noting that there have been some cracks in the surface of the economy recently, as the Federal Reserve has reiterated its desire to tighten monetary policy. Because of this, it is very likely that the US economy will slow down due to the fact that a tightening of monetary policy almost certainly will push demand down. This in turn slows down the economy, which in turn crushes demand for imports.

The most recent sign of trouble has been the University of Michigan sentiment index, which fell to a reading of 67.2 for the month of January, the lowest reading in 11 years. The omicron surge and still elevated inflation number has fueled most of the drop according to the survey, and as the consumer goes, so goes the US economy. If they feel uncertain going forward, it is hard to imagine that they will suddenly feel the need to start buying things.

One of the major bright spots in the US economy at the moment is certain niche products and consumer goods. Apple has reported its Q1 earnings this week, blowing away all estimates from Wall Street with a historic quarter due to strong demand for the iPhone 13 and services. Revenue came in at $123.95 billion versus the expected $119.05 billion. Earnings-per-share were $2.10 versus the expected $1.90 by analysts, while the iPhone earn $71.6 billion versus the rejected $67.7 billion by Wall Street. The iPad was the one miss, as it brought in $7.2 billion with the revenue versus the anticipated $8.1 billion but was written off due to most issues coming from the supply chain hiccup that we have seen.

Apple continues to be a “Wall Street darling”, and as such is a major holding for most pensions and even retail accounts. Because of this, it does capture a lot of attention and therefore this could have a little bit of a psychological “knock on effect” on the market from a greater perspective. That being said, it should be noted that we have seen a lot of reference to it being a “stock pickers market”, meaning that index investing may fail at the moment, due to the fact that most of the gains are concentrated in very specific places.

McDonald’s also reported this week, showing that its fourth-quarter earnings missed expectations, but with a spike in coronavirus infections, staffing shortages, and soaring inflation this should not be much of a surprise. However, revenue was $6.01 billion versus $6.02 billion, which is thought of as being a slight miss.

It should be noted that they have strong projections and have seen a lot of interest in digital sales, as well as delivery. At this point in time, it seems like the gimmicks and advertising of the Mariah Carey inspired menu seems to be picking up strength, as new menu options will go live in just a few days. Same-store sales growth of 16.8% in the EU has been a strong sign as well.