Powell’s Remarks, Delta’s Earnings, and More!
Editor’s Note: TGIF, dear reader!
Let’s get to it!
Fed Head Powell Eases Rate Cut Anxiety
This week, Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee on the progress the central bank has made in the fight against inflation.
What he had to say was good news for everyone hoping for that the Fed would lower its benchmark interest rate this year.
According to Powell, the Fed has made “considerable progress” in the battle. Although inflation remains higher than the central bank’s 2% year-over-year target, he noted that the U.S. is “no longer an overheated economy.”
That’s thanks to the Fed’s unprecedented rate hike campaign, which lasted from March 2022 to July 2023. In that space, the central bank’s Federal Open Market Committee (FOMC) hiked its benchmark interest rate 11 times to 5.3%.
Those hikes were intended to cool the economy by raising the costs of borrowing. In turn, these higher costs would discourage consumers from using credit cards, getting a new auto loan or mortgage, etc. By slowing borrowing and, thus, spending, the Fed hoped to cool down the economy.
According to Powell, the central bank didn’t see much evidence that inflation was coming under control at the beginning of the year.
“The most recent inflation readings, though, have shown some modest further progress,” he said. “And more good data would strengthen our confidence that inflation is moving sustainably toward 2%.”
Of course, one big signal that that has worked has been the labor market. And we’re finally seeing signs that the red-hot jobs market — which at one point boasted a 50-year record low unemployment rate — cool down too.
However, that could have some negative consequences for the economy itself. And Powell noted this week that he is attuned to the threats.
“We are well aware that we now face two-sided risks,” the Fed head said.
In addition, it looks like another rate hike — which some analysts have worried about — is not in the cards for now.
“It doesn’t seem likely that the next policy move would be a rate increase,” Powell said. “As we make more progress on inflation… we begin to loosen policy at the right moment.”
Of course, the big question is when the Fed will initiate its first rate cut.
According to CMEGroup’s (NSDQ: CME) FedWatch Tool, the futures market is now pricing in a 71.8% chance that the central bank will knock 25 basis points off the current rate range at its September meeting.
Pepsi Reports Mixed Q2 Results
PepsiCo (NSDQ: PEP) also reported mixed quarterly results this week. The snack and soda giant has been struggling as cash-strapped Americans choose cheaper options or cut out junk food altogether.
Pepsi reported adjusted earnings per share of $2.28 — higher than the $2.16 Wall Street had been expecting.
However, revenue fell slightly short of analyst estimates, coming in at $22.5 billion versus an expected $22.57 billion.
For the second quarter, Pepsi posted net income of $3.08 billion, or $2.23 per share. That’s an improvement from the $2.75 billion, or $1.99 per share, posted for the year-ago quarter.
However, Pepsi’s North American business took a hit.
The volume in the company’s Frito-Lay North America division dropped by 4% year over year, and its North American beverage business saw a volume decline of 3%.
The Quaker Foods North America division took a 17% hit to volume. Apparently, the unit was still reeling from the potential salmonella contamination recall several months ago. However, a PepsiCo spokesperson said that the company expects this division to fare better in the second half of 2024.
Still, Pepsi issued a narrower revenue outlook for the full year. The company now expects organic revenue to grow by 4% — previously, the company had indicated that growth would be “at least” 4%.
“When we’re saying at least 4%, we were talking more about around 5% in our minds,” CEO Ramon Laguarta said on an earnings conference call.
“Now we’re talking around 4… it’s related specifically to the consumer in the U.S.”
For a few quarters now, Pepsi has warned of low-income consumers pulling back from extraneous spending on snacks.
However, according to Laguarta, this trend has expanded to all income demographics. Consumers across the board are pushing back against elevated high prices by switching to store private-label brands or buying fewer grocery items.
However, he noted, “We have green shoots with some of the activities we’ve been executing, and July 4 has been very strong for us.”
The Number of Global Millionaires Hits a Record High
In its latest annual report, Swiss banking giant UBS (NYSE: UBS) revealed that the number of millionaires (as measured with the U.S. dollar) keeps increasing worldwide.
In addition, the “millionaire’s club” is expected to keep growing in many countries.
In 2000, the world had 14.7 million millionaires. Fast-forward to 2023, and there were 58 million — that’s a 300% increase in just 20 years.
The U.S. is home to most of the world’s rich folks: In 2023, there were 22 million millionaires living here. In fact, they represented nearly 7% of the country’s population.
The next country on the list is China, with 6 million. However, due to the sheer population size of the supposedly communist country, that equates to just 0.4% of the Chinese population.
In third place comes France, with 2.9 million millionaires (4.2% of its population).
Take a look:
You will find more infographics at Statista
By 2028, the U.S. is projected to have 25.43 million millionaires. Perhaps you’ll be one of them (if you aren’t already).
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