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Better than expected quarterly earnings have buoyed the S& P 500, bringing it close to a record high. However, another concerning economic indicator is being monitored: the struggling consumer. Notably, many customers seem to be pulling back on spending due to high inflation, an issue especially apparent in mass-market brands such as McDonald’s, KFC and Starbucks. Conversely, less price-sensitive sectors, like airlines and hospitality, report consumers are continuing to book flights, hotel rooms, and dinners at upscale restaurants.
This economic disparity may explain why President Biden has low approval ratings for his economic management. The more affluent citizens, whose financial assets are less impacted by inflation, are continuing to spend heavily while those less well-off are cutting back due to feeling the pinch of inflation.
With the consumer credit card debt and other loan debt on the rise, business executives have raised concerns, especially about the low-income consumers’ spending habits. Crackdowns on overspending become the norm, particularly for those consumer segments. Executives from Dine Brands Global, PepsiCo, and Tractor Supply Company reflected on this emerging trend.
Political news included Israel’s response to threats from President Biden of withholding more weapons and the Biden and Trump’s rivalry to win over businesses for campaign funds. Other significant news headlines involve T-Mobile and Verizon’s discussions on possible parting of U.S. Cellular, planned tariffs on Chinese electric vehicles announced by the White House, and Apple’s apology for an ad that spurred massive backlash.
In legal news, Fat Brands’ chairman Andrew Wiederhorn has been charged for allegedly orchestrating a series of ‘sham’ payments that accumulated for him $47 million. This indictment includes charges for tax evasion, wire fraud, filing fraudulent tax returns and fraudulent financial reporting.
The CEO of Bank of England, Andrew Bailey, has hinted that the bank may cut interest rates ahead of the U.S. Federal Reserve. Lastly, in consumer news, volatile cocoa prices have left chocolate manufacturers re-adjusting prices of their products.
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