Economic Outlook
- After decent 2Q results, the GDP is expected to flat line because of the Fed’s ill-conceived rate hikes as discussed in this post.
- While the consumer continues to hang-in, largely because they remain employed, the labor market does seem to be loosening according to Robert Half and ManpowerGroup.
- Equifax further reports that consumers are spending and borrowing with credit card & personal loan balances back above pre-covid levels, although delinquencies remain at a record low.
- So, despite an increase in the Consumer Confidence Index in July to its highest level since July 2021, it seems that consumer strength is generally softening.
Capital Markets Commentary
- QSR stocks performed well during July, with investors apparently rotating into the small caps (like Sweetgreen) and the Domino’s turnaround story while rotating out of the blue chips like McDonald’s & Chipotle which reported solid 2Q23 results but perhaps below expectations.
- FSR stocks also had a nice July, helped by BJ’s reporting that its 2Q23 restaurant-level margin reached its highest level since covid. However, Texas Roadhouse’s stock performance reflects that it told a mixed story, reporting strong demand with consumers trading down into its restaurants but then selecting value items, thus driving alcohol & entrée mix declines.
