Hey Snackers,
"Corona Hard Seltzer, Coming Ashore Soon" — the poorly-timed ad Corona released last week for its trend-chasing spinoff. Marketing probably could've gone with a different slogan. Twitter was appalled.
Markets suffered their worst week since the 2008 financial crisis — all 3 major indexes fell over 10%. More below.
Markets had their worst week since the financial crisis — blame viral uncertainty
Taking Wall Street's temperature... The S&P 500 boils down the stock prices of the 500 "most valuable" publicly traded companies on American exchanges into a single number. That number helps us quickly answer the question: “How is the US stock market doing?” Here's how the S&P 500's "temperature" changed from February 19th to February 28th (last Friday):
- Feb 19th: 3,386 points.
- Feb 28th: 2,954 points.
- That's a 13% drop in just 7 days of trading.
This isn't the same as '08... Back then, a financial crisis was caused by deep internal problems with our economy (a housing market bubble and massive debt). The threat this time is external: COVID-19 (aka coronavirus) had already shut down big chunks of the Chinese economy — but last week, the economic disruption spread to Italy, South Korea, and Iran.
- There's no cure/vaccine yet: But the Fed's chairman Jerome Powell said Friday that he stands ready to dish out monetary medicine via the central bank's bazooka of cash.
- It's a correction, not a bear market: Since 1946, market corrections with declines of between 10% to 20% have happened 29 times (once every 2.5 years on average) according to Guggenheim Funds. A bear market means a fall of over 20% — hasn't happened (yet).
- The bull market is still bucking: The S&P 500 has more than quadrupled since hitting a bottom in March 2009 — in 11 years, it hasn't dipped more than 20%. That's the longest bull market tracked to date.
Uncertainty is the market's illness... This public health outbreak could be a major hit to the economy, or it could be a blip on the freakout radar. Instead of gambling on those two outcomes, many investors have sold out of risky assets (stocks). The 10-Yr Treasury yield fell to a record low rate, meaning investors are piling into relatively safer government bonds because of uncertainty.
- Worst case: To crush a domestic epidemic, the government could mandate that cities, states, or the whole country stay at home for 30 days, which would contract our economy, shrink profits, and hurt stocks.
- Best case: The disease could remain contained (aka no epidemic at all in the USA), and there's no major disruption to our economy. America's collective stress can return to its normal, elevated state.
Who's up...
FOMO never felt so good... While coronavirus fears spread and WFH becomes the norm for many, stay-at-home stocks are cruising care-free. As stock prices were downgraded en masse last week, "no-contact" stocks actually rose: Peloton (up 9%) — work out without visiting a germy gym. Zoom (up 8%) — video conference your biz meetings instead of in-person. Netflix (up 3%) — entertain yourself without leaving the house.
What retail-apocalypse?... TJX, the discount retail giant behind TJ Maxx, Marshalls, and Homegoods, reported a 6% quarterly sales surge (and a fashionable $985M in profit). Meanwhile, JCPenney hasn't posted growth since 2017, and Macy's sales fell 0.5% last quarter. While brick-and-mortar stores shutter, TJX's trio of treat-yo-self-without-going-broke stores are embracing the "affordable splurge" that low- and middle-income Americans are craving.
...and who's down
Losing "share of throat"... AB InBev — Earth's largest brewer. Its profits plummeted 75% last quarter. And its top labels are losing ground in its largest market (the US) as Americans snub Bud Lights for White Claws. Seltzers now make up 2.6% of all US alcohol sales — more than 3X growth since a year ago. Bud has intro'd 3 seltzers but is still lagging. The biggest disruptors — Boston Beer's Truly and Mark Anthony Brands' White Claw — are now too big to acquire.
Mosh pit cancelled indefinitely... Shares of Eventbrite dropped to an all-time low despite expectations-beating revenues — that's because it's seeing "early evidence" of virus-related event cancellations. Blame this statement: "We expect the outbreak will impact live events and attendance in the near-term.” Making shareholders even sicker — event rival Live Nation enjoyed a 10% jump last week, somehow immune so far to coronavirus concerns.
What else we’re Snackin’
- Success: The 1 greatest measure of success in life, according to Warren Buffett
- Sweat: How much exercise you need to see a benefit in your brain function (and achieve optimal "brain health")
- Achieve: How to organize your to-do lists, according to Kondo-worthy "organizational experts"
- Eat: A flavor expert explains the engineering behind plant-based meat
- Work: Don't quit your job before answering these 3 key questions
This Week
- Monday: Earnings expected from Livongo
- Tuesday: Earnings expected from Target, AutoZone, Kohl's, and Nordstrom
- Wednesday: OPEC's big oil meeting in Vienna. Earnings expected from Zoom, Splunk, Dollar Tree, Campbell Soup, Marvell, LG, and American Eagle
- Thursday: Earnings expected from Costco, Kroger, and LaCroix-maker National Beverage Corp
- Friday: The monthly Consumer Credit Report
Disclosure: Authors of this Snacks own call options of Peloton
ID: 1105224