🌊 A rough spell: the Q2 edition

Recession-omics… the word on everyone’s lips. The probability of a US recession soared this quarter as the Fed aggressively hiked interest rates to tame stubbornly rising inflation. But while #flation hurts the economy, so does fighting it: higher rates discourage borrowing/spending and encourage saving, which should cool consumer demand and prices. They also lower companies’ growth expectations, which have slumped stocks into a bear market. And historically most S&P 500 bear markets have been accompanied by recessions. All eyes are on whether the Fed can cool the economy without igniting a downturn — which seems increasingly tougher.

Crypto winter dawns... Move over, web3. "Contagion" became the quarterly buzzword as the crypto market continued to tumble along with stocks, losing $2T in market cap since its November high. Algorithmic stablecoin TerraUSD's crash wiped out $40B in market value seemingly overnight, while crypto lender Celsius froze billions in customer funds. The trouble spread to other crypto companies like Coinbase, Crypto.com, and Gemini, all of which laid off employees as investors jumped ship. Bipartisan crypto regulation proposed in the Senate could be a win for the struggling industry — though with contentious midterm elections approaching, no one's holding their breath.

A tale of two labor markets… is the quarter’s biggest paradox. While rebounding sectors like hospitality and travel couldn’t hire fast enough (see: travel-pocalypse), pandemic thrivers slowed hiring and cut positions. Unemployment is at record lows and wage growth has doubled from 2019. Still, companies like Meta, Twitter, Netflix, and Uber have had mass layoffs as slowing growth threatens the bottom line. The tech industry made 8X more job cuts last month than it did during the first four months of the year combined. But with two job openings for every unemployed person, job seekers should be better off than in previous downturns.

• $156M: How much “Top Gun: Maverick” raked in on opening weekend, a Memorial Day record. Movie-ticket sales hit a 40-year low in 2020, but are rebounding as studios send hit franchises like “Batman” to theaters — and ship others to streaming.
• 3.48%: The 10-year Treasury yield’s high this quarter, an 11-year record, as investors anticipate more inflation + higher rates. IOUs are getting pricier, from credit-card interest to gov’t bonds.
• $280: The highest bid for an NFT of Jack Dorsey’s first tweet in an April auction — a year earlier it had sold for $2.9M (womp). Prices of Bored Apes and other viral NFTs have plummeted with non-fungible trading volume.
• $6.1B: How much the US has committed to support Ukraine since Russia’s invasion, which has killed tens of thousands. The EU recently approved Ukraine’s candidate status to join the bloc, giving the country new hope.
• $44B: How much Elon Musk agreed to buy Twitter for, including a $21B personal investment equaling one-fifth of his net worth. Musk said three things stand in the way of the takeover: fake accounts, debt financing, and shareholder approval.
• €0.95: How many euros one US dollar will get you. The greenback is up 9% this year and has strengthened against currencies like the Japanese yen, the Chinese yuan, and the euro. It’s an economic bright spot for the US (and American tourists).

The housing cooldown… The days of obsessive Zillow-scrolling and cheap mortgages are likely over. Home-buying demand is finally cooling as mortgage rates spike to the highest levels since ’09. Last month, mortgage applications fell to a 22-year low, while brokers Redfin and Compass had mass layoffs. Average mortgage payments are now 31% higher than rent — which could speed the cooldown. As rates rise, fewer people will be eligible/willing to take out loans. Yet home prices won’t cool until supply improves, and that could take years. In May, the median existing-home price topped $400K for the first time as inventory remained brutally low.

Retail’s inventory glut… After years of struggling to get products on shelves, big retailers now have too much stuff. Walmart said nearly a quarter of its inventory is “unwanted” as shipments meant for stay-at-home szn (think: puzzles, throw pillows) arrive months too late. Ditto for teen faves like Abercrombie and American Eagle, which are sitting on 40%+ more inventory than a year ago. Now the Amazon and Target are having huge sales events to shed extra merch. The discounts could lure stimmy-less shoppers to stores and help cool inflation.

Knockoff economy… In Russia, CoolCola’s the new Coca-Cola. Imitation brands are sprouting up after Western big shots like Nike and Coke left because of #sanctions. Despite the corporate exodus, Russia’s economy has been surprisingly resilient: the ruble has rebounded to seven-year highs and shelves are still stocked thanks to more domestic production. Former McDonald’s locations in the country recently reopened as rebranded Russian versions, with 98% local ingredients (and the same ketchup packets).

• Overturn: Economists are raising concerns over the effects of overturning Roe v. Wade on the autonomy and economic opportunity of millions of Americans. The SCOTUS decision stands to potentially hurt wages, jobs, and growth.
• Jab: Teens get their pick of Covid vaccines after the CDC on Friday recommended Moderna's shot for 6- to 17-year-olds. The vax joins Pfizer's, but it's unclear whether the added choice will mean more shots in arms.
• Aid: US companies from JPMorgan to Apple are ramping up medical coverage for workers who may have to travel for abortions. Some employees are calling for even more corporate action, but conservatives may retaliate.
• Web: A fintech company aims to make gun buying easier by offering buy now, pay later options — including for the manufacturer of the gun linked to the Uvalde shooting. BNPL could help the gun industry target younger shoppers.

• Monday: G7 Summit in Germany. Wimbledon begins. Earnings expected from Nike, Trip.com, and Jefferies Financial Group
• Tuesday: G7 Summit in Germany. Earnings expected from Concentrix and Roivant Sciences
• Wednesday: Earnings expected from Paychex, General Mills, McCormick & Co., MillerKnoll, and Bed Bath & Beyond
• Thursday: Jobless claims. Earnings expected from Micron Technology, Constellation Brands, Walgreens Boots Alliance, Acuity Brands, and Simply Good Foods
• Friday: Universal Pictures’ “Minions” premieres. Tour de France begins
• The weekend: US markets are closed on Monday for Independence Day

Authors of this Snacks own: shares of Amazon, Apple, Moderna, Uber, Walmart, Netflix, and Twitter

ID: 2261083