Inflation has permeated its way through many sectors of the economy causing consumer sentiment to dip, but US equities (^GSPC, ^DJI, ^IXIC) are trading at record levels. Edelman Financial Engines Director of Financial Planning Kelli Smith joins to break down some of the best strategies for consumers to fight inflation. Social Security remains a top concern for retirees as latest reports detail it could dry up by 2035. Memorial Day weekend is right around the corner and with it comes great discounts across amny retailers, but should consumers buy in?
I’m Brad Smith and this is Yahoo Finance’s guide to building your financial footprint.
Our community of experts will give you the resources, the tools, the tips and the tricks that you need to grow your money.
And on today’s show, guess what a new Gallup poll says inflation is America’s biggest financial problem.
We’re bringing you an expert with tips on how to combat inflation at every age.
And NVIDIA has been a de facto a standard by Goldman Sachs and is set to report quarterly results this week will dive into the lofty expectations and smart positioning strategies going into the event.
Plus Memorial Day weekend is upcoming and retailers, they are anticipating that the long weekend may include some shopping plans.
We’ve got your rule of thumb for how you can go on a budget and spend in a sea of sales and what you can hold off on on the other side of that.
But first, let’s take a look at some of the market action here.
We’re 90 minutes into today’s trading activity and we’re taking a look at the Dow Jones industrial average right now.
And the NASDAQ composite, you’re seeing that higher by 6/10 of a percent.
Well, the dow holding around 40,000 after closing at the landmark level for the first time ever on Friday.
And that is Wall Street feeling pretty giddy, but main street isn’t necessary feeling.
All the love consumer sentiment is at a six month low with Americans citing inflation, high interest rates and concerns over unemployment.
This is backed by a recent Gallup poll where 41% of Americans name inflation or the high cost of living as the most important financial problem facing their family.
And in the corporate earnings world 219 S and P 500 companies mentioned the term inflation on Q one earnings calls that is still staying above the 10 year average, but quarter over quarter, at least showing some easing.
So what is this discrepancy between stocks at all time?
Highs and consumers feeling down on the economy?
Joining me now, we’ve got Eric Friedman who is the US Bank Asset Management Group, chief Investment Officer.
We’ve also got Steven Sciutto who is the Mizuho Securities us, chief economist fixed income.
Great to have both of you here with us today.
Let let’s start first on the economic side of this and, and Steve particularly as we think about where there is this disconnect between what Wall Street is saying and what main street or what the household economics are feeling right now.
What’s jumping out to you the most, at least in the sentiment readings that we’re seeing.
Well, I think the difference really is the price level is the problem for households, not necessarily the inflation rate.
It’s the level of prices, prices went up substantially in the post COVID environment and they continue to be at a high inflated level and that is really eaten into household disposable income in terms of their discretionary spending.
Now, on the other side of this equation, the inflation is helping corporate America produce solid earnings.
And as a result, it’s driving the equity market.
So uh the tail of two I don’t think really is necessarily the tail of two.
It’s, it’s the same thesis going throughout in here that prices are high inflation is helping to keep those prices remaining high.
And that’s really driving the ability of companies to have pricing power and that’s driving earnings and that’s what’s driving the equity markets.
And so, Eric, how much is that showing up in earnings as Steve was just mentioning.
Yeah, it’s showing him quite a bit if you look at the overall levels of corporate earnings growth expected for this year at about 8.5% and then next year expected at 10 10.5%.
Those are some pretty large numbers.
And certainly part of that is just inflation, if you look at what we’re seeing in nominal terms or not inflation adjusted, you’re getting that higher for longer, type of type of mentality really seeking into and keeping into corporate earnings.
So I think the other thing that’s really important is not only is it impacting corporate earnings, but also the housing market.
And one of the things that you’re seeing is that if you own a house, your house value is probably gone up, you’re, you’re spending more money.
If you don’t own a house, you want one, it’s of course, very difficult to get one both with respect to housing prices, then also the cost of financing.
So that has a, a double edged sword effect.
If you, if you have a house, you feel pretty good about it.
If you don’t, you’re really in a tough spot because of just how unaffordable housing has been and likely will be for some time and just to follow up on that as well.
I mean, that is one of the areas that the fed and, and data continues to point out is that when you have homers homeowners equivalent rent or when you have the cost of shelter and the cost of energy continuing to be the stickiest parts of inflation.
There is a consideration for where that also impacts other areas of household spending too.
Uh And Eric just to follow up on that has that shown up in, especially as we’re looking for some of these retail earnings over the course of this week where CEO S are talking about Pullbacks in certain aisles because there are elevated expenses that households have to consider right now.
Yeah, Brad, we are seeing that and if you look at some of the, the overall, let’s call it demographic differences, you’ve got middle income and upper income consumers doing pretty well.
Lower end consumers are actually, I should say lower income consumers.
those that, that are really having a tough time with borrowing cost that elevated also oil prices which remain quite sticky.
That’s a larger part of their consumption basket.
So that has been an environment that has been relatively persistent.
Starting to see that really pick up though.
And if you look at some of the earnings we had, we had last week as well as from retailers this week, those are really important tells for us to understand just sort of di what sort of dichotomy we’re seeing across the consumer landscape.
So in general, consumers are doing well, but you’re starting to see some level of disparities across a different income cohorts which you and corporate earnings can provide some more insights into Steve, you know, just one more question on the economy here.
And then I wanna shift to some investing strategy but, but specifically, as we think about what will force the fed to cut, what is it that’s gonna show up in the data that will finally perhaps be the the determining factor outside of us getting to that, that 2% target that seems ever elusive, at least as of right now.
Well, let me, let me be clear, we don’t have any rate cuts priced into our forecast for 2024.
Uh And the reason for it is we don’t think the economy is gonna give them the opportunity.
What could give them the opportunity would be a deterioration in the labor market.
Um And it would have to be a bit more of a sustained deterioration in the labor market given the fact that inflation has gotten stuck.
So I I think the reality is there’s likely to be less if not, no rate cuts this year.
And that is the one thing that I think is missing from the valuations in the equity market as we continue to grow entirely here is yes, earnings are very, very good, but the market also is assumed that you’re gonna get rate cuts this year and that may continue to get pushed further out in the calendar.
Now, does that suggest a correction in the equity market?
Probably not, but I think you have to think about 2024 more as a year in which the economy catches up to the equity market rather than the equity market.
You know, retraces back to the economy, Eric, you know, as we’re thinking about the equity market here, dow crossing 40 k significant milestone for investors that are trying to figure out.
Ok, what next they’re charting their own strategy even from a high like this, what is that next natural consideration as investors have to realize or think about the trends that have driven us to this point and whether that’s still locked in so much so that they can remain comfortable in what are becoming some very overcrowded trades.
Yeah, I think that that really is an important focal point in terms of the notion of overcrowding.
Look, Steve and his team do outstanding work.
And, and we have similar conclusions about just the the importance of of interest rates when we’re looking at things like this kind of cash flow models, the way that we try to look at stocks or bonds or other instruments.
And, and so the key consideration is where we actually see interest rates settle out over time.
And, and there’s been a little more of a reconciliation between the fed and the market in, in 20 to 24 but 2025 and 2026 there’s a bit of a disparity there.
And one of the reasons why we think there’s a disparity is because we think that the market expects commodity inflation to actually hang around and potentially even inflate from here.
So one of the things that we’re doing in portfolios is actually hedging with physical commodities.
We think that’s a good thing to own in a client’s portfolio.
You generally don’t have that same type of exposure in corporate earning.
And so owning more index based commodity exposure, we think it makes some sense.
The other thing that we’re doing is really diversifying sources of cash flow for people who just own stocks and bonds.
We think there’s lots more that you can do in the, in the client’s portfolio.
And so owning things like reinsurance, owning things like non agency mortgages, those are we think some unique and interesting sources of cash flow because again, this notion of rate cuts or no rate cuts, but also probably more importantly, where will the fed settle out over time?
We would get back to that lower uh federal funds rate that we enjoyed post co eight or nine crisis.
We don’t think so.
We think it’s gonna probably normalize somewhere with the three in front of it as opposed to the five in front of it right now.
So I think there will probably be some level of rate cuts but not as many as the market may anticipate for this year and perhaps uh the balance of next year.
And so with that in mind, for a normalization portfolio strategy, are, are there areas of the market that investors can feel comfortable with a a set it and forget it strategy and, and which sectors would that be in Eric?
Yeah, you know, probably never a a set it and forget it just because it is a, you know, this, this is one of those environments where, where things move around quite a bit.
But I’ll tell you some of the areas that we’re pretty focused on.
Number one would be the energy market.
Again, we talked about commodities a second ago, but energy companies have been very disciplined.
They’ve been forced to be so through shareholder activism.
So that’s a spot that we think there’s still an opportunity to lock some value.
We still like technology.
Although we do think that there is again a big stand delivered time this week.
If you look at where you’re seeing an A I the notion of more, let’s call it O ems or, or producers, actually delivering services across the landscape will be important to justify evaluations.
I also think there’s an area that is probably a little less uh uh you know, appreciated as equal weighted S and P. You talk about the dow reaching its all time, high equaled S and P has lagged for the last couple of years and for good reason because because of course, we’ve had more of a tech driven backdrop.
So we think that for those clients that are looking for a little more safety and also wanna participate in large cap companies because we actually think there’s some refinancing risk in small cap owning equal weighted S and P is probably our preferred method of getting large cap equity equity exposure right now.
Those would be the things that we were more interested in this environment.
Brad uh just lastly while we’ve got you guys, Steve, uh, we, we heard Yardeni research essentially say today, the, the Q 1 2024 and is over, earnings season is over.
They said, um, and, you know, kind of looking at the S and P 500 EPS A as the basis there versus the actual results that it came in and it exceeding expectations, all of those things considered from a macroeconomic perspective as we look out to the rest of the earnings seasons that are set to come over the course of this year.
What is one major theme that investors should be prepared for coming up from the purview of many C suites?
Yeah, I think as long as the fed is telling you, they wanna cut rates even though they’re not necessarily ready to pull the trigger.
Um The buy on dip strategy really just continues to dominate in the marketplace.
And I think that’s gonna create an opportunity for people to originate uh not only uh debt but also a new equity origination going forward in here.
The spreads are very, very tight yields are about 20 to 30 basis points lower than we were at our recent peak.
Uh And I think you’re gonna get people looking to come in and tap the market as a result of that.
My thanks here to USB US Bank Management Group, Cio, Eric Friedman and Mizuho Securities US, Chief economist of fixed income Steven Sciutto.
Gentlemen, thanks so much for taking the time here this morning.
Big bets on the A I trade with NVIDIA set to report quarterly results in the days ahead.
How can you set yourself up for success in the A I space?
That’s next price to earnings ratio or pe ratio refers to a company’s share price relative to its earnings per share or EPS.
A company’s share price is the amount of money that it takes to buy one share in a company earnings per share or EPS refers to how much net income a company makes divided by the number of outstanding shares.
And so the equation for pe ratio is the share price divided by the earnings per share and there you’re taking a look at the ratio formula.
Now there’s two common measures of pe and that’s both forward pe and trailing pe trailing price to earnings that relies on past performance and uses the total EPS for the prior year.
So current share price divided by the EPS for the prior 12 months, but forward price to earnings ratio, which we’ll dive into now that gives future earnings and uses future earnings guidance rather than those trailing numbers.
So this is seen as more of a forward looking indicator.
Now overall here pe ratio, it can be used to gauge the value of a company and you compare that ratio to itself a pe ratio from a prior year.
It can be compared to other stocks in the same industry or against the broader market like the S and P 500 as well.
Well, another test to the market’s momentum this week is NVIDIA.
The A I darling is announcing its first quarter earnings results after the bell on Wednesday, capping off reports from America’s biggest tech giants, NVIDIA shares have been performing well up 90% this year and its earnings report will certainly impact the A I trade.
So how can you set yourself up for success ahead of these big results for more?
I’m joined by David Wagner, who is the ACTIS Capital Advisors, Portfolio manager, David.
Let’s dive into this one here, NVIDIA the bellwether for the A I trade.
What is the anticipation here?
And is this for what we’re considering and expecting to be another goldilocks type of report they’re gonna need to deliver?
Are they gonna be able to hit on all the metrics that Wall Street is looking for?
Yeah, Brad, obviously, you’re right.
NVIDIA is the linchpin for the A I market narrative that we’ve witnessed for basically the last 12 to 16 months, but really looking at this report, I’d actually probably flash back to the report just three months ago.
I think that there was a lot of optimism and exuberance really heading into the Navidi report just just three months ago, but it really became a no style type of event.
That’s kind of what I’m expecting out of this quarter right now.
I mean, we’ve been so accustomed with NVIDIA, having some type of beaten raise and an unbelievable revenue beat on the top line mechanism.
It’s just become standard, but that’s also why that this is one of the most crowded names out there in the market right now.
So I think that the markets pricing in about an 8 to 9% move on the upside or the downside if you look at at all levels.
Uh I would probably be selling some short calls on this because I just don’t think that um a lot of the exuberance heading into this report is actually gonna be shown in, in the stock price.
I think it’s just gonna be a three wood right down the middle of the fairway.
It’s gonna be a beat and raise.
But I think the commentary that we’re gonna see from Jensen itself, especially on the transition from uh the Hopper to Blackwell is really what’s gonna be the investor focus uh on Wednesday night.
All right, I can tell you while we’re watching the uh PGA championship over the weekend for sure, David.
Ultimately, you know, one of the huge things that investors have to consider is where NVIDIA sits in terms of its value for any investors that are considering kicking the tires on buying in versus some of the rest of the A I annex names within the market right now.
What’s your evaluation there?
Yeah, Brad, obviously that that’s the big question right now and it really reminds me of Bill gates’ observation that the impact of technology is often overestimated in the first two years, but then underestimated over the next 10 years.
But with that said, yeah, NVIDIA is absolutely gonna curse some type of demand driven air pocket over the next few years.
But that really doesn’t mean that the stocks overvalued in my mind.
You know, I think we need as a investors need to be focusing on the denominator their earnings aspect of the pe multiple you’re just talking about and not the the numerator with the price.
Now, this call on valuation was much easier heading into this year when NVIDIA was trading at 30 times forward earnings, which is about 15 turn below its largest pier A and D but not only that, it was trading very much in line with Intel, which is a company that in my mind continues to let investors down via no technological advancements over the past few years.
But if you fast forward to today, like NVIDIA does trade at a premium to Intel, it still trades at a discount to a MD.
So that makes me believe that this stock right now trading at 37 times for earnings, it’s gonna be a little bit more fairly valued.
But like I said, I, I should state that investors should not focus on the valuation for NVIDIA right now.
They need to focus on the revenue growth and the continued demand for their products and the transition from Hopper to black.
If the stock were to material materially drop, I think it’s gonna be due more to an earnings air pocket or earnings with than just simply valuation.
We were just taking a look at the year to day chart for NVIDIA of course, uh uh a landmark run for itself over the course of the past 52 weeks and, and during 2023 and then here year to date, adding on another 90% in gains here when we think about more broadly for where within the A I trade is still has the most upside potential.
Whether that is the chips, whether that is the language learning models that are gonna be set to come forward, whether that’s just the utility companies that are set to make bank because of all the different data centers that they’re gonna have to operate as well.
Uh I agree with you that it’s gonna be more on the picks and shovels aspect.
Uh of the trade itself.
So that still will be in, you know, the intangible aspect of the chips themselves.
But again, on the utilities, I think the utilities are somewhat a misnomer because it’s really caught my eye here lately because, uh, you know, utilities and rates, they should have an inverse correlation yet, utilities have really caught a bid in the face of higher rates.
But utilities, they are very much a regulated um sector within the S and P 500.
But I think there’s other ways to play proper utilities that are not as regulated more on the private side like uh uh Qantas Services PWR.
Basically, they’re a private company that deal with the transmission lines are going from the utility location itself to the data center.
So it’s not regulated by the government.
You know, they have basically a backlog that goes out 10 years from now and they have a lot of pricing power.
It’s, it’s a great company value may seem stretch if you look at it, you know, versus five year history.
But I think it’s very much warranted for the amount of work that’s gonna be really coming due, not just in a year or two for now, but 10 years down the road because these are projects that just can’t be planned one year out.
They’re playing 456 years out.
So there’s a lot of visibility in the backlog of this company.
And I think that’s another great way to play this A A I narrative outside of, you know, your, your A nd your N NVIDIA.
But I’d also look at like a stock like, like Verta, we were talking on morning brief about the number of companies that were mentioning A I on earnings calls in this most recent quarter and, and even going back to Q four of last year, uh and the stock price increases that they’ve seen thereafter.
But what is the warning sign that investors should be looking for if there’s too much exuberance from some of the companies that doesn’t seem like it has anything to do with A I. Yeah, I guess there’s that phrase pay to play.
But when it comes to a lot of these earnings calls, it’s, it’s say to play.
They want to say A I and they think that they can play in that narrative is itself but you know, you have to look through the, the, the force through the trees here to see who are the actual beneficiaries.
But coming out of earnings season Q 1 2024 earnings season Brad, I think my biggest takeaway was actually the amount of spending that is gonna be incurred by the magnificent seven names moving forward.
I mean, obviously the, the absolute number was supposed to be very high, but I think a lot of people are really taken back by the actually uh Capex revisions from this past quarter.
I think the magnificent seven are expected to spend $328 billion just in 2024 on Capex.
And that’s basically through A I so my big takeaway here is, you know, I think over the last year, the market has focused on the magnificent seven and their profitability.
I mean, just look at med itself and its year of efficiency.
But the market is gonna have to really start to f and recognize how it’s going to warrant the valuation of these magnificent seven names.
As we transition from, you know, the years of profitability and focus on R IC to the transition to this really heavy Capex spend that’s really coming out of the seven names and see if that can actually transition from Capex spend into incremental revenue growth and economies of scale for the profitability like through return on invested capital.
Yeah, some supreme spending that they’re putting forward.
We’ll see if it could actually generate some magni some returns here going forward as well.
David Wagner, always a pleasure to speak with you and get some insights at this capital advisors, portfolio management.
Good to see you absolutely coming up.
We explore how to protect your wallet from inflation at every stage of life and will social security be there for you when you’re ready for to retire?
Maybe, maybe not.
We’ll see how advisers are preparing their clients for a world with uncertain social security benefits.
That’s right after this break ahead stay tuned, inflation moderating slightly last month.
But that doesn’t mean your wallet isn’t still hurting from some rising costs.
The inflation rate remains above the fed’s 2% target.
So how can you combat inflation at every stage of life to break it all down for us?
We’ve got Kelly Smith Edelman Financial Engines, financial planning director here with us.
Hey, Kelly, good to see you.
So people across different age portions of the economy right now trying to understand, OK, what is the best financial positioning that I can implore to help me outlast high costs, especially if it’s some of the stickier services side on housing and energy that we’ve seen.
What are some of the effective strategies that you’ve seen?
Yeah, good morning.
It’s really important to understand that the best way to combat inflation is to get out in front of it.
I understand that we’re in a position now in the economy where not everybody has had that luxury of doing the planning.
Um But it’s really important when you are preparing for inflation, inflationary environments that you are saving.
It’s so important to build out emergency savings.
Um depending on where you are in your up toward retirement, you want to make sure that you’ve done retirement planning, retirement savings maximizing those and minimizing debt where possible.
And so with that in mind, I mean, we’re taking a look at some of the, the top tips here and, and building a cash reserve what is that?
What is that new figure or a, a good percentage basis?
Even to keep in mind when starting to build up that cash reserve, it’s a little bit different for everybody.
When I’m working with my clients, it really just depends on their personal situation.
A single income household is going to probably have a little bit more cash reserve need than a double income household.
If you have more Children, if you’re paying for childcare, you probably want more cash reserves just to make your basic ends meet.
So I really sit down and encourage people to sit down and calculate if you are going to be unemployed or in an inflationary environment, you know, for 36, 12 months, what would it look like?
What would you need in order to maintain your cost of living your standard of living uh during those uh those months, what about those who are already either marching towards retirement have said, you know, this is my date.
I’m ready to be there come hell or high water by November or by October, maybe even earlier, they’re ready to be retired or perhaps even those that are in retirement and you’re seeing some of the effects of inflation kind of biting away at some of those savings.
Well, that is really a concern of a lot of my clients who are near or in retirement already.
Um And we really want to focus on at that point assuming we’ve done the planning and hopefully we’ve done the planning.
We want to make sure that our expectations are flexible, but sometimes we can’t control what happens in the world around us.
So if we can think about, um, if we can, we down downsize a little bit, can we reduce expenses?
Another big one is really helping keep control over how much we give to adult Children and how we spend in those ways on our discretionary expenses.
So I think it’s very important to change behaviors where needed, but really to have flexible mindset, reducing, reducing debt is a big one.
And sometimes going back to work is an option as well.
And then just lastly since you mentioned back to work, there are some people that are, you know, freshly getting into the workforce.
We’re at college graduation season here, you know, as they’re setting themselves up and, and preparing a financial mindset for, for planning for the future, what is the number one thing that they can implore and as they’re starting to hop into the workforce?
Well, there’s so many, the first thing is have a plan.
Uh having a plan means that you’re going to be able to calculate how much you need to save for the long term, how much emergency savings you have.
And in other ways, it’s going to help you combat inflation over time, making sure you are not accumulating any sort of debt and especially credit card debt, which tends to really blow up during this inflationary periods.
But having a plan controlling your spending have very good expectations or moderate expectations about your lifestyle.
That point.
So that way you are really on a saving and spending path that going forward will help you develop those emergency savings and combat this inflation going forward.
Kelly Smith Edelman Financial Engines, Financial planning director, Kelly, thanks so much for taking the time.
Thank you your golden years.
Well, hopefully Golden Year report on Social security findings that trust fund reserves will go dry in 2035 and that means the pool of cash that social security pulls from will not have enough to pay 100% of benefits for what this means for you in your retirement.
We’ve got Yahoo Finance’s very own carry Hannon here with more.
Now Social Security is clearly one of the biggest fears that people have when they look towards their retirement income.
And is it gonna be there for them?
This is really, really top of mind for people when this report came out, what it’s basically telling us as of right now with their calculations, you would get um a 17% cut in benefits.
So it’s not saying it’s going away, but you will get reduced benefits if Congress doesn’t do something in the next, you know, under 10 years.
So for a lot of seniors of more than half of seniors, social security represents over half of their income.
So this means a lot and it is something that people really have good reason to be concerned about.
They’ve been paying into it throughout their working lives.
And so how are financial advisor prepping their clients for a world with reduced social security benefits?
So I did a round up, I called some of my favorite, uh, financial advisors and to say, hey, so since the report came out, are you getting uh some calls from your clients?
And yes, in fact, they are and, and this is what they basically are telling them.
Number one, let’s plan as if you are not going to get social security at all.
Now, that’s probably not the scenario, but it’s better to over prepare.
So they say plan that you’re not gonna get it.
And many of them have already done this for their clients.
Number two is to start saving and investing as early as possible with the idea that it might not be there for you.
So I hate to be doom and gloom, but that’s a good way to set your mindset.
So a younger person should really be ramping it up as early as they can.
And the third thing is if you’re nearing retirement and close to that time where you can tap into it, you know, try to delay a lot of people.
Now with all the emotions running around this hot button issue of social security and what’s gonna happen, they want to grab it as soon as they can at age 62 to start tapping the benefits.
And frankly many people may have to because they simply cannot continue to work because they’re in physical jobs or have health issues.
But if you can delay and uh you know, advisers, tell me if you can delay at least to your full retirement age, which is generally around 67 or if you can push it to 70 you get the biggest checks possible for the remainder of your life.
But as you know, I said, at the start, it’s better to be over prepared.
Certainly some very critical insights from your own reporting here, Carrie Han and thanks so much for taking the time here, uh and bringing us some of the tidbits from those conversations you’ve been having as well.
Thanks Brad.
Coming up everyone, sales, sales sales, Memorial Day weekend is this week and it’s about more than sales.
But we’ve also got an expert that’s gonna break down what you should buy or could buy for the big sales events that are gonna be taking place and all throughout your feed, unlimited shrimp deals for $20.
Well, it turns out the Red Lobster deal may have been too good to be true.
This weekend, the Orlando based chain filed for chapter 11 bankruptcy, citing high labor costs, rising rents and yes, unlimited shrimp.
In May 2023 the struggling seafood chain, which was seen as a 30% percent drop in diners since 2019, they announced that their $20 ultimate endless shrimp would become permanent.
A disastrous move that ended up costing them $11 million with inflation worries causing diners to eat out less.
Red Lobster lost $76 million in the 2023 fiscal year.
The restaurant’s parent company T Union had been in talks with lenders to give up to 80% of the company.
But the talks fell through.
Lenders had interviewed $20 million worth of loans in February, but they were unwilling to contribute more without more support from the owner, the owners.
According to court filings, the company which employs 36,000 people in the United States and Canada abruptly closed 93 locations last week.
Well, in honor of Memorial Day and one of the biggest shopping weekends of the year, we know it is consumers hunting for a deal out there.
Our very own Brooke De Palma is here with the latest Brooke.
Consumers are expected to spend less as you know, to this Memorial Day weekend than they did a year ago.
So, what exactly is behind that?
Well, there are two reasons here, a pull back in consumers buying big ticket items like appliances and furniture, which sales during the 3d and are traditionally focused on and second consumers seeking out value and discounts.
Now, both of these combined are to blame for the slight decline in total spend.
According to retail me, not consumers will spend an average of $297 per person this weekend.
That’s actually down about 17% from where we were a year ago.
And just how much consumers typically spent during this holiday weekend.
Yet consumers seem to be willing to stretch their dollar in order to celebrate this Memorial Day weekend.
They’re going to spend the most on categories like food and beverages that’s followed by clothing and apparel, dining out, partying, decor, and entertainment.
Now, the last category on shoppers minds, gardening and home improvement and that’s something we saw in Home Depot earnings results last week that diy customer pulling back and spending less on home improvements and gardening and other ways to make their home look better that, that, uh you know, magical home renovation.
But a majority of Americans do plan to skip out on shopping this weekend entirely.
34% say they will wait until Monday though in hopes to score the best deal.
And so a mixed picture this holiday weekend, Brad back to you.
Fortunately, I don’t have a lawn.
So uh no lawn care or green thumb projects for me, but I got some interior plants.
So, if you are one of the 18% shopping this holiday weekend, what products should you buy and what can wait for the next big sale?
Joining me now we’ve got Adam Davis, who’s the Wells Fargo retail finance managing director here to break down just that.
Ok.
So what are the deals that are perhaps worth kicking the tires on or buying into over Memorial Day weekend, Adam?
Yeah.
So typically, I mean, we’re seeing some of the bigger ticket items, um, you know, appliances, furniture, outdoor, indoor, as well as mattresses.
And so those are kind of the big ones.
But you know what we’ll see is retailers will start to sell through, uh, spring merchandise.
And so you’ll start to see some deeper discounts on some of the spring merchandise in addition to some of those bigger ticket items.
What, what does that say then about the health of those inventory levels when you’re looking at where the retailers are really comfortable slashing prices clearing through or turning through inventory in order to make sure that they can perhaps be ready for the next wave of orders that they’ve already placed for later on this year.
Yeah.
So it’s, I mean, it’s important, I mean, for the retailers to kind of go from season to season and so what they’re doing is getting ready for summer and, you know, as you are thinking ahead, you know, summer sales, you know, they want to sell as much as possible at full price.
And so you’ll see some promotions this weekend for summer items, summer apparel.
But as you get to the tail end of the summer, you’ll see kind of deeper discounts on in season items as they start to prep for fall and, you know, holiday type goods.
The extreme would be think of a snow blower right now is a great time to buy a snow blower.
If you try to buy one now would be heavily discounted.
If you try to buy one after the first snowstorm or during the first snowstorm, it’s gonna be a much, you know, it’s not gonna be heavily discounted because it’s in high demand.
And so we were just taking a look on screen at what not to buy perhaps in this wave of sales that are gonna be taking place in the next few days here.
And I mean, we’re looking at things like apparel, electronics in season goods.
Why is that?
Yeah, so the in season goods, they’re just, they’re going to be promoted this weekend but not as heavily as potentially those big ticket items, which historically, this is a big weekend for that.
I think the other piece being retailers are going to try to clear through kind of that spring merchandise, especially like apparel.
I think what you’ll see is at the end of the season, that’s where heavy discounts will come into play.
I think, you know, for grills and outdoor furniture, you know, it’s, it’s tempted to buy it, you know, it’s very tempting to buy.
Now, I think it would be, you know, if you have a specific item that you absolutely have to have, then, you know, kind of shop around kind of hunt, um, do some price comparisons.
But if you are a patient are able to wait till the tail end of the season, you should be able to see kind of bigger discounts on the electronic side, you’ll see discounts.
But what we have historically seen heavier accounts around July Black Friday, Amazon prime day.
And then as you get into the fall with traditional Black Friday and Cyber Monday, those are just heavier discounts for electronics.
Ok. All right.
That’s some, uh, interesting calculus on, on where not to fall into the, the pits of the vibe du Jour if you will, you know, ultimately, as we’re kind of considering now for consumers and where they’re showing that they do have a little bit of propensity to still spend versus areas that they’re saying I’m gonna, I’m gonna pull back.
Where is that kind of looming heavy as we go into big sales events to kick off and even throughout the summer?
Yeah, I mean, the consumer is still shopping, right?
And I think that what we’ve seen is the first quarter has been relatively muted or quiet.
I think the good news is, the retailers have gone through multiple waves over the last few years.
And so they’ve been really thoughtful and you know, about their inventory levels and not getting too deep and supply chain has smoothed out a little bit.
So you’re not seeing the lumpiness that we’ve seen over the last few years.
So with that, the retailers can kind of push in and pull out as it relates to promotions.
Memorial Day Weekend is one of the first big sales weekends for all retailers.
And so you’re gonna see most of um participate.
I think it’s really, are they promoting store wide on online for everything or is it very specific targeted items that maybe they’re trying to clear out, move, you know, you know, create room for new product or is that an older generation item that they’re looking to then later this year, introduce the next generation of?
All right, Adam, I’m, I’m quite removed from my days of clipping coupons.
However, there are quite a few deals to be had out there.
So who knows, I might be picking up a circular.
But for those who are looking across some of these deals, how, how should they be evaluating them and what are the top tips to save when evaluating all of the different deals in the market?
Yeah, I mean, look, it’s I I would say loyalty programs are key.
I mean, retailers love that information.
They love pushing out those types of promotions, you’ll be the first to know whether, you know, a, you know, a certain brand or certain products going on sale.
So I think loyalty programs are big price comparison between the different retailers is big and you could probably pull up kind of where certain products were on sale last year.
And, and if it is a specific technology item, A TV or something along those clients, you know, I think what you can do is look at what was on sale last year for, you know, prime day and, you know, during the summer and when those brands ultimately introduce the next generation, because that’s really where you start to see the heavy, heavy discounts.
Other than that, you know, it’s gonna be a promotional weekend.
And I think, you know, this is kind of the unofficial kickoff for the summer.
And I think that’s where, you know, you’re gonna see that transition from spring apparel to summer apparel and you know, where, where you can find bargains is really gonna be some of that clearance stuff on some of the app on the spring.
All right, I saw the bottom tip on that graphic which was be patient.
Adam Davis Wells Fargo Retail Finance managing director.
Thanks so much for some of the tips and tricks for this big weekend.
Coming up ahead of their latest earnings later this week, target has announced price cuts on thousands of items.
We’ll give you the details when we come back in an effort to turn around sluggish sales numbers target to charge will be cutting prices on 5000 items this summer with 1500 items getting their prices slashed effective immediately with the company reporting its latest earnings.
This Wednesday, our own Madison Mills joins us to explain why Target is making this move right now.
Ok. What’s the impetus behind this?
Well, they’re noticing that consumers are starting to buckle under the weight of inflation and they need to do something about it.
We’re seeing the likes of Walmart a very successful earnings print bringing in consumers across the income level, which could be an indication that consumers are looking for better deals.
Target wants to get in on that and they’re doing that by cutting prices on a lot of what we call the consumer staples, the things that you can’t really go without your Clorox wipes, your Thomas bagels.
If you’re a fan of a non New York City bagel here, you know, with their lotions, Huggies, cutting down prices on those items.
And the company says they’re going to be cutting back even more as we head into the rest of the summer and said again, shoppers can expect more bargains for July 4th and the back to school and back to college seasons as well.
Now, it’s interesting to note is that these price cuts come again as we are seeing additional kickbacks from target to consumers.
Those who are in the Target Circle card program can get an additional 5% discount on top of the discounted prices that we’re already seeing across these 5000 items.
So it’s an indication to me that target.
I, I mean, I think there’s a chance that consumers could get a little bit irritated by this because obviously it’s good to have the price cuts.
But at the same time, could they have lowered these costs months ago?
Uh Also, I, I have never tried thomas’ bagels.
I’ve only tried the e the, the, the muffin, the English muffin, but I mean, it’s coming at a time too where they’re using this to promote ahead of Memorial Day weekend, summer sales saying, hey, some of these everyday low items, whether it’s red cups for those of you who are probably tossing some ping pong balls into it or those of you who just need, you know, an extra grill at home.
Um Those everyday low prices that they’re trying to talk about are also trying to promote the Du Jour of seasonality too.
Well, and it’s also interesting, I forgot to note this.
That could be a potential move to compete with Walmart as well.
Let’s do a quick final check of the markets here as we’re taking a look at the dow, the S and P 500 the NASDAQ.
They’re positive starting off the day on a positive note here, we’re taking a look at gains across the board.
Market domination with Julie Hyman and Josh Liton.