🍦 Soft-landing vibes

Recession obsession... For years we’ve been warned about an impending economic plunge. Soaring interest rates were expected to throw a big ol’ recessionary wrench into the US economy. CEOs were pointing to ominous “macroeconomic trends.” And finance reporters never failed to mention “recession jitters.” As recently as December, 75% of economists expected the US would enter a recession. Now strong data has boosted optimism for a soft landing (aka: cooling inflation without sparking a recession). 

• Outlook = sunnier. Economists have dialed back recession expectations. Most still expect a contraction, but a smaller one than previously feared. 

• Inflation = easing. The pace of inflation has slowed for 12 months straight, falling to 3%. Sticky “core inflation” — which excludes volatile food and energy, but includes housing and rent — appears to be finally budging down. 

• Jobs = hot. The unemployment rate of 3.6% is near a 50-year low. Hospitality has led the hiring surge, and mass layoffs in tech have been cushioned by lots of folks finding new gigs. 

Turn down for what... The long-predicted downturn hasn’t turned down yet. That’s largely thanks to resilient consumer spending, which accounts for about 70% of US GDP. Wages are (finally) outpacing inflation again, and consumers are still consuming, though a bit more conservatively. Some recent highlights: 

• Retail sales rose again last month as Americans looked for ecomm deals. Amazon had a record Prime Day as we “stimulated the economy” by buying Bluetooth headphones. 

• Travel is booming as people prioritize experiences. Delta and United posted record profits on fierce demand for international vacays (Americans splurging on “White Lotus” summers).

AI on the prize… Big Tech names are set to report after AI innovations fueled recent rallies. Meta teamed up with Microsoft to offer its large language model to developers, who can use it to build AI software. Google updated its Bard bot (more languages, better image analysis) and launched it in Europe. Meanwhile, Snap just intro’d a genAI lens that can anime-fy selfies. But as concerns mount around the new tech, Meta, Google, Amazon, and others just agreed with the Biden admin to add more guardrails.

Purple shake… Fast-food earnings are next up for delivery. Domino’s, McDonald’s, and Chipotle topped Wall Street’s expectations in April as Americans kept hitting the drive-thru (and delivery apps). Now the chains want to grow their reach. Chipotle is expanding big-time in small towns, where it says it's seen up to 3X more burrito sales. Domino’s is taking its ’za-delivery biz to UberEats for the first time. And McDonald’s has leaned on viral menu items to boost growth (its Grimace shake is already beefing up sales).

Streaming takes a hike… Netflix added ~6M subs last quarter following its password crackdown, and last week it axed its cheapest ad-free plan. It isn’t the only streaming bill on the rise: NBCUniversal’s Peacock (which expects to lose $3B this year) plans to jack up prices for the first time next month. In the past year, Disney+, Hulu, Warner Bros. Discovery’s Max, and Paramount+ have all bumped sub costs. With profitability still eluding nearly all streamers, the generosity era could be over. 

Too hot to handle… As extreme heat bakes the planet, farmers are feeling the burn. Sunbelt states like Texas are seeing crops like cotton, rice, and corn wither in triple-digit temps. In the Midwest, the heat and a potential drought could put grain-producing states at risk of crop failure. Meanwhile, cereal production in Europe is expected to fall as much as 60% this year. Spain, the world’s top olive producer, is facing a second straight year of bad harvests

• Toxic: A report found that 2K+ toxic lead cables across the US (owned by telecom titans including AT&T and Verizon) could be a public-health liability. With estimated removal costs of up to $60B, telecom stocks sank. 

• FedFinally: The Fed launched FedNow, its long-awaited 24/7 instant-payments system, with a small # of banks and credit unions. Picture: paying rent at the last minute or having paychecks hit in real time. 

• Siloed: Russia ended a critical wartime deal that let Ukraine (a leading grain exporter) ship grain safely across the Black Sea. The move could threaten global food security, particularly in some African nations.

• AIQ: OpenAI’s AI text generator, ChatGPT, is becoming less accurate (read: dumber), a study from Stanford and Berkeley found. It could stoke already fired-up fears about the tool’s tendency to spout misinfo. 

• Copycase: Three artists have sued Shein, alleging that the retailer copied their designs — not the first time Shein’s been accused of selling rip-offs. Controversies (ahem, that factory tour) could hurt Shein’s US popularity.

• Nil4NIL: Scammers are making deals to use student athletes’ name, image, and likeness, charging them high fees to secure nonexistent contracts. Two years ago, the NCAA started letting college athletes profit from partnerships.

• Monday: Earnings expected from Logitech, Domino’s, and Whirlpool

• Tuesday: Fed’s two-day meeting starts. Earnings expected from Microsoft, Alphabet, Snap, Cal-Maine Foods, Albertsons, 3M, Visa, Verizon, GM, GE, Spotify, and Raytheon

• Wednesday: Samsung Galaxy Unpacked. Earnings expected from Meta, Boeing, Coke, Union Pacific, Chipotle, AT&T, Hilton, eBay, and Mattel

• Thursday: Earnings expected from Boston Beer, Crocs, Comcast, Ford, Harley-Davidson, Hertz Global, Hershey, Keurig Dr Pepper, Mastercard, McDonald's, Mondelez, Oatly, PG&E, Royal Caribbean, Roku, Shell, Southwest Airlines, Sweetgreen, T-Mobile, Valero, and Intel

• Friday: Earnings expected from Exxon, Chevron, Colgate, Procter & Gamble, AstraZeneca, and Sanofi

Authors of this Snacks own shares of: Alphabet, Amazon, Comcast, Delta, Disney, Exxon, GM, Mattel, Microsoft, Roku, Snap, and Uber