Barron’s Weekend Summary: Jack Kleinhenz says, skyrocketing prices have made it difficult to suss out how consumers are spending—or not—their rapidly devaluing dollars
Cover Story:
Jack Kleinhenz, chief economist for the National Retail Federation, has been making projections about consumer spending and other economic measures for more than 25 years. Kleinhenz says, skyrocketing prices have made it difficult to suss out how consumers are spending—or not—their rapidly devaluing dollars. Add in the general volatility and uncertainty plaguing everything from stocks to interest rates to the job market, and you can understand why he and his fellow forecasters are at a bit of a loss.
Interview:
No interview this week
Tech Trader:
-The self-declared Apple bull Erc Savitz admits that ‘even’ he is starting to worry about AAPL stock’s performance. “I’ve generally been pretty bullish in this column about the outlook for Apple stock. But when I assess the situation now, I see reasons for concern—growth is slowing, and might go negative, and valuation is elevated. Apple shares look vulnerable. The stock is down about 15% this year. That would be a bummer in most years, but in a tough stretch for tech, Apple has outperformed its peers, and by a wide margin. Microsoft is off 31%, Alphabet is down 35%, Amazon.com has tumbled 43%—and Meta Platforms has plunged 67%. Apple is now worth more than Microsoft and Meta combined.
The Trader:
-Match stock has failed to make a connection with investors this year, falling 65% in 2022, far worse than the S&P 500 17% drop. Shares have been hurt by the stronger dollar—the company gets more than half of its sales overseas—and by delayed product rollouts. Still, there’s a lot to like about Match, almost as much as Bumble, its smaller competitor, which Barron’s recommended a week ago. Product fixes could help restore its former high growth rate, particularly if new features can entice users to buy higher-priced subscription plans and make a la carte purchases. And its most recent earnings report shows that it’s signing up new users and finding ways to monetize them.
-The stock market appears to have moved on from worrying about the Federal Reserve—even if it’s not out of the woods just yet. What’s keeping observers awake is whether the US economy shall sink into recession and if this will trigger a retest of stock market lows. It wasn’t a great week for the stock market, but neither was it a bad one. The Dow Jones Industrial fell by just 0.01%, and the S&P 500 dropped 0.7%. The NASDAQ fell by a more substantial 1.6%. That loss was especially disheartening coming just one week after the NASDAQ staged its biggest rally since March amid optimism about slowing inflation.
Features:
-Twitter has had a tumultuous month since Elon Musk took control of the social-media platform, but the FIFA World Cup (in Qatar) is about to start, and this sporting event has triggered significant user engagement spikes in past editions of this most watched of world sporting events: Every four years, when the World Cup is on, soccer fans jump on the platform to see video highlights, react to the action and interact with one another. The quadrennial event begins Sunday, and any preparation that Twitter employees would normally make for the event have taken a back seat to confusion and disarray that has snowballed since Tesla CEO Musk acquired the company and began making massive changes. Musk laid off roughly half of Twitter’s more than 7,000 employees a week after closing his convoluted, on-and-off $44B acquisition, then continued to fire contractors as well as workers who voiced displeasure with his tactics publicly and on internal Slack discussions.
European Trader:
-Clean-energy developer Ceres Power Holdings has created fuel-cell technology that produces low-cost green energy, and which it licenses to partners such as Germany’s Bosch, China’s Weichai, and South Korea’s Doosan. These companies manufacture and sell this technology. This intellectual property has mass-market potential and was set to generate even more fees this year. But negotiations with partners of a China joint venture have been delayed until next year, the company said. The loss-making UK-based company has said that means those earnings won’t appear until next year.
Emerging Markets:
-After securing his third consecutive term as president of the People’s Republic of China, Xi Jinping has sprung some pleasant surprises on markets, starting from a 16-point plan to bolster an imploding property sector. Investors have liked the initiative, which, among other things, backstops “high quality” developers with big credit extensions and the right to access some escrow funds that buyers have prepaid for their apartments. The Global X MSCI China Real Estate ETF has jumped by a third in the past week, paring its year-to-date loss to a mere 30%. But Beijing’s emergency measures only go so far, and they may have gone there already. “The first leg of the rally was sentiment,” says Vivian Lin Thurston, an emerging markets portfolio manager at William Blair. “To go up from here, you need to see some fundamental macro recovery.”
Commodities:
-The European Union’s ban on seaborne imports of Russian oil, along with the Group of Seven’s plan to cap prices of oil from Russia early next month, won’t guarantee that prices for the commodity will see a lasting rally, or that supplies will tighten further in the days ahead. “In isolation, the sanctions on Russia should be bullish for prices,” says Matt Smith, lead oil analyst, Americas, at Kpler. However, they may have a limited effect, as Russian barrels get “rerouted and not taken off the market,” while a price cap still has so much uncertainty surrounding it that its impact may be “muted due to workarounds or may simply be ineffective.”
Streetwise:
-This week, Jack Hough looks a role-playing games and what he calls ‘strange finance.’ A Wall Street bank this past week turned decidedly bearish on shares of Magic: The Gathering (a 30-year-old role-playing game) owner Hasbro, sending them down 10% in a day: “The fact that I’m now discussing the underperformance of orcs and goblins is related, I can’t help but think, to the recent crypto collapse and broader decline in what I’ve been calling weird finance. Not that role-playing games are weird or nerdy or juvenile. OK, they’re all of those things, but in the best possible sense. I missed out on Dungeons and Dragons get-togethers in high school, only because I was busy doing macho things—like putting on shorts and bouncing a ball around a parquet floor with nine other guys. Friends who played grew up to be more interesting than those who didn’t. And during the pandemic, tabletop role-playing games—TTRPGs to insiders—enjoyed a renaissance, with help from a D&D-filled story line in the Netflix hit Stranger Things.”