#709 – 🍻 Sobriety is in – The Average Joe

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    #709 – 🍻 Sobriety is in

    victorlei

    June 5, 2024

    Good morning. Congrats to the 10 semifinalists who made it to the next round of Miss AI — the world’s first beauty pageant for AI-generated models. Contestants are judged on beauty, social clout, and tech skills (specifically, how well they prompt AI tools). This gives new meaning to the phrase “It doesn’t matter what’s on the outside, it’s what’s on the inside that counts” — and in this case, the inside is all ones and zeroes.


    TRENDS

    Conservative Criticisms of LGBTQ+ Support Have Limited Effects on Brands

    June is here, signaling long days, hot temperatures, and political controversy. With celebrations like Pride Month and Juneteenth, this month holds special significance in the US culture war. While some celebrate, others express differing opinions, sparking discussions in the business world.

    Revisiting the culture war: Last year, American corporations faced backlash for supporting diverse groups, particularly the LGBTQ+ community. Companies like Target ($TGT), Disney ($DIS), and AB Inbev’s Budweiser ($BUD) faced boycotts and political criticism for their inclusive marketing efforts. The social pressure was intense — and the impacts were immediate.

    • Last year, Target recorded its first profit decline in six years, AB InBev reportedly lost out on over $1B in sales, and Disney engaged in a political battle with Florida’s right-wing government.

    • In response, companies adjusted their strategies — Target reduced its LGBTQ+ merchandise offerings, and the director of inclusion consultancy at Trans& reported a downturn in “funding and support of LGBTQ+ inclusion initiatives.”

    The True Impact of Protests

    Despite different responses, companies often emerge victorious in the culture war. Since last June, stocks of $TGT, $BUD, and $DIS have risen by 15%, 14%, and 13%, respectively — with minimal impact on sales.

    • Other brands like Southwest ($LUV), North Face ($VFC), and Nike ($NKE) have also seen little impact.

    • However, this year’s Pride Month has seen a reduction in diverse advertising, affecting the earnings of queer influencers, according to ModernRetail.

    At odds with the future: According to AP, companies like Starbucks ($SBUX) and General Motors ($GM) will continue supporting Pride-related events this year — even as others appear to be pulling back. Budweiser’s attempt to cater to diverse audiences with its advertising backfired, offering a lesson for others: attempting to please everyone can ultimately lead to alienating everyone instead.


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    LARGECAP RECAP

    💸 Recap Time: S&P 500 Companies Deliver Strong First-Quarter Earnings

    With 98% of the S&P 500 having reported their earnings, Wall Street is wrapping up the first quarter with optimism. Despite CEOs warning about consumer pullbacks, 78% of companies beat earnings expectations, a figure above both analysts’ predictions and historical averages.

    • According to FactSet, the S&P 500 marked its 14th consecutive quarter of revenue growth, boasting the highest year-over-year (YoY) earnings growth rate since Q1 2022.

    • Earnings rose by 5.9%, while blended revenues increased by 4.2% YoY, driven by strong performances in the communication services, financials, and information tech sectors.

    All about expectations: Bucking negative economic data, analysts have raised their expectations for S&P 500 firms in the upcoming quarter. The optimism is fueled by rosier company forecasts, especially in the energy and materials sectors. Additionally, mentions of “recession” on company earnings calls have declined, with doomsday discussions at their lowest since Q1 2022.

    👷 Today's Empty Lots Are a Tale of Yesterday's Apartment Boom

    Dreams of tall buildings are coming down to Earth due to a slowdown in construction. The US is feeling the aftermath of the largest apartment construction boom in decades, leaving many developers with empty lots and unstarted projects. Higher interest rates and rising construction costs have significantly strained development nationwide.

    • Yardi Matrix data shows the average time between construction authorization and the start of construction has ballooned to nearly 500 days — a 45% increase since 2019.

    • Meanwhile, the Census Bureau notes that multifamily building starts have plummeted to an annual rate of 322K units in Apr. 2024, the lowest April rate since 2020.

    Cementing the future: Developers across the country are facing stagnant rents and a slow market, leaving little financial incentive to build. Local resistance from NIMBY (Not In My Back Yard) groups adds to the challenge, especially in rapidly growing states. Despite these setbacks, cities like Austin, Seattle, and Minneapolis are scrapping restrictive building policies that have hampered construction. This proactive approach has helped spearhead strong construction activity — but it’s hard to say if other cities will follow their example, especially in a market like this.


    JOE’S MARKET PULSE

    🔗 Carnival / Bath & Body Works

    Why it pays to be a gold-getter: After 6 millenia, gold remains a go-to investment to protect against inflation and economic uncertainty. That’s a solid track record: regardless of how times change, there’s no denying it’s a currency you can count on. Learn how to add gold to your portfolio (and an IRS tip that could save you $1000s). Get the free report →*

    Markets & Economy

    US job openings reach three-year low: In April, US job openings dropped by 296K to 8M, the lowest since Feb. 2021. This indicates the Fed’s higher interest rates are now weighing on the economy, even as inflation persists. [Read]

    Surprise election outcome shocks India: Exit polls predicted Narendra Modi would extend his decade-long leadership, but instead, India’s leader and ruling party will enter its next term without a majority in parliament. [Read]

    US Dollar at its strongest since 1985: Higher interest rates have helped push America’s currency to its highest level since the 1980s, an era marked by high inflation and economic turbulence. [Read]

    Business & Wealth

    401(k) plans disproportionately benefit the rich, says Vanguard: A new study by retirement giant Vanguard found that the US retirement system disproportionately favors wealthy Americans, with higher contributions and employer matches boosting their wealth. [Read]

    Elon Musk’s X will allow adult content: Watch out, OnlyFans. Elon Musk’s X will now permit adult content on its platform, provided it’s clearly labeled. [Read]

    New and used car sales are flattening: Despite falling vehicle prices, Bank of America reports that auto sales have stagnated due to rising interest rates and insurance costs deterring buyers. [Read]

    *Thanks to our sponsors for keeping the newsletter free.


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    Adding AI to Your Portfolio – Is Now the time?

    Eyes on AI: Nvidia’s stock surge is just the start. Big Tech is investing billions of dollars in artificial intelligence, signaling the expanding potential for disruptors like New Sapience.

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    CHART


    DIGIT OF THE DAY

    Non-Alcoholic Beer Growth Surges 12x Faster Than Alcoholic Brews

    The sober curious movement has a frontrunner — non-alcoholic beer. Since 2018, the global market for non-alcoholic beer has seen a robust annual growth rate of 3.6%, outpacing the sluggish 0.3% growth of alcoholic beer. This shift is driven by better quality, improved flavors, and changing drinking habits across generations.

    • In 2023, non-alcoholic beer sales hit $13.2B, led by brands like Heineken 0.0, Japan’s Suntory All-Free, and AB InBev’s Brahma 0.0%. By 2028, sales are expected to reach $18.6B.

    • According to GlobalData Plc, non-alcoholic beer (less than 0.5% alcohol) makes up only 31.4M hectoliters annually, far less than the 1.93B hectoliters of alcoholic beer sold.

    Change is brewing: Young people are leading the charge in the US, with only 62% of adults aged 18 to 34 opting for alcoholic beverages, down from 72% in the early 2000s. Millennials and Gen Z strive to live healthier lifestyles and be more mindful of their consumption choices. With the Olympic Games approaching, AB InBev is betting on its campaign to boost the popularity of non-alcoholic beer.

    While this shift indicates a bubbling preference for alternative beverages, non-alcoholic beer still has a long way to go to reach the volume of its boozy counterparts.

    Read: Cannabis Daily Use in the US Climbs, Overtaking Alcohol with a 15x Increase Since 1992


    EXTRA JOE

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    All content provided by The Average Joe is for informational and educational purposes only and should not be taken as trading or investment recommendations.

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