The week ahead 06/19/2023
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As always, here’s your fun fact before we get going on:
After 113 days into 2023 — the market has performed in its top 15 most successful years since 1928. The majority of the time, the market continues to grind higher for the rest of the calendar year.
And then comes 2024 — a presidential election year. The chart above shows how the stock and bond markets typically perform during the selection process of the next Commander in Chief.
Why call these things out? Well — because it’s the strangest time in the market anyone has seen in decades. The economy is screaming “danger” from a variety of metrics, jobs reports continue to show quality employment, housing is holding up fairly well, and inflation is coming down.
The main takeaway for you? Don’t take history as a perfect indicator for what’s going to happen in the market. Simply put, this is a complete anomaly of an environment and we likely haven’t seen the full impacts of the most rapid rate increases in history come to light.
With the SPY closing in on 440 and the current P/E ratio of the S&P 500 well above 25 — it’s not the most exciting time in the world to invest solely into the market as a whole. There’s a solid possibility that it will be a stock-picker’s market for quite some time.
Lastly — don’t forget about the ole’ Buffet Indicator. Albeit overly simple, it paints a picture that it’s reasonable for investors to be skeptical of current valuations.
Key Earnings Announcements:
FedEx and Darden Restaurants are in focus.
Monday (6/19): Markets Closed for Juneteenth
Tuesday (6/20): FedEx, La-Z-Boy
Wednesday (6/21): KB Home, Steelcase, Winnebago
Thursday (6/22): Accenture, Commercial Metals, Darden Restaurants, FactSet, Gypsum Management & Supply
Friday (6/23): CarMax
What We’re Watching:
FedEx’s last earnings report spotlighted stagnating revenue metrics across Ground, Freight, and Express — with a massive operating income decrease in the Express segment. Investors will be looking to see if YoY volume continues to be sluggish for the shipping giant.
Analysts expect $4.85 EPS on Revenue of $22.5 billion.
You can explore the most recent FDX investor presentation here.
Darden Restaurants (DRI)
Darden Restaurants’ most recent report highlighted $2.79 billion in Total Sales, Total Sales Growth of +13.8% and Same-Restaurant Sales Growth of +11.7%. Leadership projected revenue to slightly slow down from the previous quarter — so we’ll be interested to see if those projections were too tame.
Analysts expect $2.54 EPS on Revenue of $2.8 billion.
You can explore the most recent DRI investor presentation here.
Investor Events / Global Affairs:
Breaking down S&P 500 action by industry and we’re keeping an eye on Japan’s largest automaker.
Time for a Change?
It’s always important to take a step back and see what’s been winning this year. The answer is clear — tech stocks (and Bitcoin) have been the main rippers YTD.
Will there be a shift toward Consumer Staples, Healthcare, and Energy?
Back in April, our friend Jaguar Analytics argued that we were in Quad 4 (upper left) of his S&P 500 Industry Cycle. The most recent market activity suggests that we may have shifted to Quad 1 (upper right) in the past few months. Re-sharing this graphic as it’s something you may find interesting:
“We don’t think the market has to give back the recent strong gains, but we do believe investors should expect some hiccups as we progress.
The longer-term path will be guided by an eventual bottoming and rebound in the economy and corporate earnings, while the short run may be subject to the dotting of “i’s” and crossing of “t’s” in evolving Fed commentary, as well as changes in stock-market leadership.
With proper expectations for bouts of volatility, we think these are conditions long-term investors can lean in to, buying dips and proactively rebalancing with an eye toward the broader bull market that we think will find its stride over time.”
Toyota’s (TM) Best Week Since 2009
Toyota stock just had its best week since 2009 — with a +10.6% increase — as the company presented a strong plan for future EVs and re-elected Akio Toyoda as leader of the board.
This rally was very unusual for Toyota, which has only experienced three double-digit weekly gains in over two decades. The stock’s positive performance is attributed to the easing of supply chain issues in the automotive industry and Toyota’s transition from CEO to chairman.
Toyota outlined its plans to develop a new generation of EVs to compete with Tesla and BYD — including vehicles with solid-state batteries by 2027 or 2028. The company aims to achieve a driving range of 1,000 kilometers (620 miles) for its EVs and plans to produce around 1.7 million vehicles by 2030.
As the EV landscape continues to develop, we’ll be keeping an eye on Toyota.
Major Economic Events:
Getting a gauge on S&P PMI data and checking in on the all-important Leading Economic Indicators.
Monday (6/19): Home Builder Confidence Index
Tuesday (6/20): Housing Starts, Speech by NY Fed President Williams
Wednesday (6/21): Fed Chair Powell Testifies to House Committee
Thursday (6/22): Existing Home Sales, US Current Account, US Leading Economic Index
Friday (6/23): S&P Manufacturing & Services PMI (Flash)
What We’re Watching:
PMI Early Readings
Purchasing Managers Indices (PMIs) — which show the prevailing direction of economic trends in the manufacturing and service sectors — have been screaming “we’re not quite out of the woods yet” for months now. This week, we get a glance at where the next S&P Global results could be coming in.
US Leading Economic Index
The Leading Economic Index provides an early indication of significant turning points in the business cycle and where the economy is heading in the near term. You’ve heard us talk about it plenty of times before — it’s a great measure of both the overall economy and market sentiment.
Always excited to see these results.
Which stocks moved the most last week.
Our friends at LevelFields scrub through thousands of data points each week to determine how events impact stock prices.
The Consumer Product Safety Commission announced that Peloton was served a $19 million civil penalty for not immediately reporting entrapment issues with its Tread+ treadmill and continuing to sell the recalled products.
Thanks to LevelFields, we found out that this was actually considered good news as this was a relatively small penalty for something that has been hanging over the company’s head for years now.
If you’re starting your investing journey or are interested in buying T-bills yielding 5% or more, consider visiting Public.com.
Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.