🐖 Did We Pass Peak Obesity?

Plus, why snack food companies aren't scared of weight loss drugs.

October 12, 2024

Hi All - Happy Saturday and welcome back to Street Tweets from The Street Sheet. 

Q3 2024 earnings season kicked off in earnest yesterday. As a quick refresher, on June 30, the estimated (year-over-year) earnings growth rate for the S&P 500 for Q3 2024 was 7.8%, according to FactSet. Today, however, the estimated (year-over-year) earnings growth rate for the S&P 500 is 4.2%.

It's a fairly significant revision, which ushers in negative sentiment.

But, "if 4.2% is the actual growth rate for the quarter, it will mark the 5th straight quarter of year-over-year earnings growth for the index."

For what it's worth, the downward revision over the course of a quarter is normal. The magnitude of this downward revision was larger than the 5, 10, and 15-year averages, but smaller than the 20-year average.

At the sector level, nine out of eleven sectors saw their bottom-up EPS estimates for Q3 2024 decline between June 30 and September 30, with Energy (-19.2%) and Materials (-9.4%) experiencing the largest drops.

In contrast, the Information Technology sector was the only one to post a slight increase (+0.3%) in its EPS estimate over the same period.

With that, let's dive into today's edition.

Together With Porter & Co.

$750 million... five years... all for this one new AI technology

Bill Gates is making his next big bet. And this time, it's with artificial intelligence.

Over the last several years, Gates has quietly invested more than $750 million into this technology. And he's not the only one. Warren Buffett, Peter Thiel, Jeff Bezos, and others are in on it too. 

Market Review:

The S&P 500 and Dow Jones Industrial Average hit new highs on Friday, closing out a strong week as the third-quarter earnings season began on a positive note.

All major indices posted a fifth consecutive week of gains, with the S&P and Nasdaq each rising 1.1%, while the Dow gained 1.2%.

Strong earnings reports from major banks like JPMorgan Chase and Wells Fargo boosted investor confidence, despite some concerns over declining net interest income.

Additionally, cooler-than-expected inflation data eased fears of persistent price pressures, suggesting the Federal Reserve may achieve its soft landing target. In fact, the Wall Street Journal ran a headline on Friday that read: “JPMorgan Calls It: The U.S. Economy Has Made a Soft Landing.”

The likelihood of the Fed reducing interest rates by a quarter point in November stands at 86%, with policymakers closely monitoring further economic data to guide their decisions.

Market Preview:

On Monday, October 14, the bond market will be closed in observance of Columbus Day. However, at 3:00 PM, Federal Reserve Governor Christopher Waller is scheduled to speak.

Moving on to Tuesday, October 15, the economic calendar will feature the Empire State Manufacturing Survey at 8:30 AM, followed by remarks from Fed Governor Adriana Kugler at 1:00 PM.

On Wednesday, October 16, the Import Price Index will be released at 8:30 AM, along with the Import Price Index excluding fuel.

Thursday, October 17, will be packed with data releases and events, starting with the initial jobless claims report at 8:30 AM. Also at 8:30 AM, U.S. retail sales data will be released, including retail sales excluding autos. The Philadelphia Fed Manufacturing Index will come out at 8:30 AM as well. At 9:15 AM, industrial production and capacity utilization data will be published. Business inventories are expected at 10:00 AM, and shortly after that, at 10:00 AM, the Home Builder Confidence Index will be released.

To close out the week, on Friday, October 18, housing starts data will be released at 8:30 AM, along with building permits. Federal Reserve Governor Christopher Waller will give another speech at 12:10 PM.

GO DEEPER

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Look at both ends of the spectrum

You’re saving money at the pump, but just make sure you don’t get in an accident on the way there.

By the way, why is auto insurance skyrocketing? Here’s why:

  • Claim frequency and severity

  • Vehicle repair costs

  • Weather: "Hail-related auto claims represented 11.8% of all comprehensive claims in 2023, up from 9% in 2020, according to CCC Intelligent Solutions."

Not so fun fact: Drivers in Maryland currently pay the highest average rate, at $3,400, for annual full coverage as of June, an Insurify analysis found.

A recent Morgan Stanley analysis predicts GLP-1s will reduce the consumption of sodas, baked goods, and salty snacks by up to 3% in the next decade. But, but, but:

  • "Despite worries that the medications could dampen sales, Conagra, WK Kellogg, and General Mills are among companies optimistic that sales for popcorn, frozen meals, and even cereal could benefit," Christopher Doering writes for FoodDive.

A few are seeing new opportunities to sell more popcorn, frozen meals, cereals, and soups. Tom McGough, co‐chief operating officer with Conagra Brands, told Wall Street analysts that consumption of better-for-you frozen meals increased 8% in people taking weight-loss drugs.

Zooming out: “Erin Lash, a director of consumer equity research at Morningstar, noted prior health trends, including gluten-free, dairy-free and the Adkins diet, ‘have not derailed these companies in the past,’ largely because they appealed to a small number of customers and interest waned over time. Weight loss from GLP-1s is just the latest health and wellness trend to impact the food sector.”

Why does this potentially matter?

Well, according to research conducted by LPL Financial Holdings:

“In the lead-up to Election Day, the performance of the S&P 500 — the benchmark index synonymous with the stock market — has accurately predicted the winner of the U.S. presidential election 83% of the time…

“… Since 1928, the incumbent party remained in control of the White House in 12 out of the 15 elections when the S&P 500 was positive during the three months leading up to an election. On the flip side, the incumbent party lost the election eight out of the last nine times when market returns fell in the three months before an election.”

Together With Porter & Co.

$750 million... five years... all for this one new AI technology

Bill Gates is making his next big bet. And this time, it's with artificial intelligence.

Over the last several years, Gates has quietly invested more than $750 million into this technology. And he's not the only one. Warren Buffett, Peter Thiel, Jeff Bezos, and others are in on it too. 

Full disclosure: We can’t verify if this is accurate or not.

But we included it because, after two hurricanes in a row, it got us thinking.

Are you bullish or bearish on Florida real estate over the next 10 years?

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