# 686 – 🌱 Growing like a weed (stock) – The Average Joe

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    # 686 – 🌱 Growing like a weed (stock)

    victorlei

    May 2, 2024

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    Good morning. When it comes to health, genetics are often seen as the judge, jury, and executioner. No matter how healthy you are, genetics will have the final say. However, a fresh study reveals something pretty empowering: a healthy lifestyle has the potential to counteract the impact of certain genes that might shorten your lifespan by 62%. And for those with genetic factors nudging them towards an earlier exit, embracing a healthy approach to eating and movement could extend their life by ~5.22 years.

    Conducting a study like this isn’t simple, so it’s wise to approach the findings with a critical eye — but also take some comfort in knowing that you’re not just a passenger on the genetic rollercoaster of life. 


    TRENDS

    Consumers Begin Scaling Back on Spending After Strong Years for US Economy — With the Fate of Earnings and the Economy At Stake

    Amidst the pandemic, the US staged a remarkable recovery, quickly becoming the world’s strongest economy. However, even the US is susceptible to the laws of physics: what goes up must come down.

    Holding on for dear life: After remaining hardy in the face of stagflation, some of America’s largest companies are warning investors that consumers are tightening their economic belts — and finally pulling back on spending after a banner few years for the US economy. This earnings season, companies have reported weaker results — and issued subdued forecasts for the coming quarter. This has reignited recession angsts on Wall Street — leading to a 3.6% decline in the S&P 500 this month.

    • Food chains like McDonald’s ($MCD), Yum Brands ($YUM), and Starbucks ($SBUX) are signaling that economic pressures are weighing on consumers, translating to weaker spending.

    • Industrial giants such as 3M ($MMM) are noting “softness in consumer discretionary spend,” while Newell Brands ($NWL) singled out inflation as a reason for weaker guidance (CNBC).

    Challenges for the Fed

    Weaker consumer spending not only impacts corporations but also the Federal Reserve — which has already had to digest weaker-than-expected GDP growth and an acceleration in high-profile layoffs across some sectors. And making matters worse, American consumer confidence fell to its lowest point since Jul. 2022 (back then, inflation was over 8%, the worst in four decades). Still, the Fed isn’t blinking…

    • After the Federal Open Market Committee (FOMC) meeting yesterday, the Fed kept interest rates at a 23-year high — with the target rate glued at 5.25-5.50%.

    • The Fed emphasized that rates would remain high as long as inflation persists, suggesting they may stay elevated through 2024.

    Renewed recession fears: Some analysts, like QI Research’s Danielle DiMartino Booth, believe the US economy is already showing signs of a recession — but with positive GDP growth in the first quarter and expected strength in Q2, there’s no technical recession in sight. Nonetheless, a long-awaited pullback in high-flying US equities could be next if earnings continue to disappoint. Eventually, the pundits and analysts may see the recession they’ve been incorrectly predicting for the last three years.


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    LARGECAP RECAP

    🌿 Marijuana could see rescheduling, boosting weed companies

    It’s tough to be in the drug business… especially when your drugs aren’t legal. And although that hasn’t stopped the canna-biz, a significant government move might provide a much-needed lift to the struggling performance of cannabis companies. The Drug Enforcement Administration (DEA) and Justice Department are considering reclassifying the devil’s lettuce to Schedule III, reducing the severity of penalties for possession or distribution — though it would remain illegal federally.

    • This reclassification, as reported by Reuters, could open up the doors to research and medical applications while attracting more private investment to the cannabis sector.

    • As a result, shares of the AdvisorShares Pure US Cannabis ETF ($MSOS) surged by 10% this week, pushing its one-year return above 70%.

    Hope is a dangerous thing… Weed is already legal in 40 states but hasn’t translated into ideal investment conditions. Over the past five years, marijuana plays have wrestled with survival as a result of weak sales — and unkept promises on legalization and banking regulations, stifling the industry’s growth potential. Despite recent gains, $MSOS remains down 77% over the past three years. And given that the proposed reclassification still doesn’t legalize marijuana or solve many of the industry’s endemic problems, the current rally may be short-lived.

    Read: Billionaire Steve Cohen trips as psychedelics edge closer to mainstream

    💸 Investors get a bit more picky about their AI plays

    As the curtain falls on Big Tech earnings, investors are turning their attention to companies reaping the benefits of the AI surge here and now — not later. Microsoft ($MSFT), Alphabet ($GOOG), and Amazon ($AMZN) all posted strong earnings fueled by soaring cloud revenue. However, costly AI hardware and infrastructure firms witnessed a downturn following a massive 16-month rally.

    • Meta hinted at the necessity of “meaningfully” increased AI spending, which resulted in a 12% boost in its capex range. Even AI “laggard” Apple has recently invested in AI servers.

    • According to a recent survey of tech leaders, most don’t believe their infrastructure is “AI-ready,” and 42% don’t expect a return on these AI investments for two years.

    AI hype slows: Taiwan’s stock exchange, a bellwether for AI excitement, experienced its largest outflows last month since Oct. 2023 as chipmakers lowered their outlooks. Market sentiments have cooled towards chipmakers such as AMD ($AMD), which narrowly beat sales expectations but still faced a dip in shares. Same for Super Micro ($SMCI), where revenue missed, although the company remains optimistic about long-term AI demand. However, Nvidia’s ($NVDA) upcoming earnings on May 22 will test this hypothesis.


    JOE’S MARKET PULSE

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    Markets & Economy

    Johnson & Johnson ($JNJ) settles $6.5B talc lawsuit: The company has faced thousands of lawsuits over the years, alleging a link between its talc-based products and ovarian cancer. Further settlements are expected for connections to mesothelioma, a rare cancer. [Read]

    Pfizer ($PFE) exceeds Q1 expectations: A gentler-than-expected drop-off in COVID drug sales helped, along with solid results for non-COVID products. But the big difference came from its cost-cutting initiative, projected to save ~$4B by the end of 2024. [Read]

    CVS ($CVS) shares dip amid lowered profit outlook: The drugstore chain owns Aetna — one of many health insurers feeling the pinch of rising medical costs. With those higher costs expected to persist, CVS lowered this year’s adjusted earnings from $8.30 per share to $7. [Read]

    Business & Wealth

    Impact of internet subsidy cut on telehealth: The program that helps low-income households save on high-speed internet will run out in June if Congress doesn’t act — which could make it harder for millions of Americans to access their online healthcare providers. [Read]

    BlackRock ($BLK) introduces lifetime payment 401(k)s: A few employers have already set up such plans, which invest in annuities once the employee is 55 — then they can buy that annuity a few years later to lock in paychecks for life. The plans could lead to lawsuits, though, so employers are moving slowly. [Read]

    FTC targets pharma industry’s “junk patents”: These patents can jack up prices for certain brand-name drugs while making it harder for competitors to join the market. One such patent belongs to Ozempic, the blockbuster diabetes drug. [Read]

    *Thanks to our sponsors for keeping the newsletter free.


    CHART


    DIGIT OF THE DAY

    After Three Years Of Declines, California’s Population Growth Makes a Comeback

    For 169 years, California’s population steadily expanded… until 2020, when the COVID-19 pandemic sent Cali residents in search of more affordable, lower-tax cities like Austin, Phoenix, and Vegas. However, the Golden State is once again seeing brighter days. In 2023, California broke its streak of decline and celebrated a revival in population growth.

    • The New York Times reports that last year, California added over 67K new residents, a 0.17% rise from the previous year — bringing the population to 39.13M.

    • Among California’s 58 counties, 31 experienced population growth, particularly in the Bay Area, Central Valley, and Inland Empire regions.

    Golden times: Despite still being ~400K people below pre-pandemic levels, California’s reversal of decline can be attributed to factors like enhanced legal immigration, lower mortality rates, and reduced emigration. The state has also made strides in addressing its housing challenges, adding ~116K new units last year, including thousands of accessory dwellings (a.k.a. small affordable homes). H.D. Palmer from the state’s Finance Department expressed confidence in California’s resilience, stating, “We’ve returned to positive and sustainable rates of growth for the foreseeable future…we’re back.”

    Read: Immigration is the unsung hero of the post-pandemic economy


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