CEOs are suspiciously optimistic

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Monday, March 27, 2023

Today’s newsletter is by Brian SozziExecutive Editor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Read this and more market news on the go with the Yahoo Finance App.

As I look around the economy, things look calm… too calm, perhaps, given how March has gone so far.

The most surprising calm I see is with US consumers, aka the same ones ingesting weeks of banking crisis headlines at the same time still dealing with too high inflation at retail stores.

Just peep recent credit card spending data out of Citi and Bank of America.

Aggregate retail spending among Citi cardholders for March is only down slightly compared to this same point in February. Interest rate sensitive sectors such as home improvement and home furnishings continue to see the largest declines in sales. But apparel, food and restaurant spending is holding up very well.

Over at BofA, total card spending fell by only 0.4% year-over-year for the week ending March 18.

Then there are the anecdotal signs of economic calm I have picked up late.

Ford came out last week and maintained its full year financial guidance. CFO John Lawler told me the guidance reflects what he is currently seeing in the economy — presumably tightening financial conditions from the banking crisis. The next day, Ford CEO Jim Farley (video above) sounded another upbeat note on business trends when we talked (and teased an autonomous pickup truck).

At a dinner of big-time thought leaders I went to last week, one financial services CEO stood up and said there had been no demand trend changes in March compared to the company’s last earnings call.

I got the same “everything is OK right now” vibe talking to Petco’s CEO Ron Coughlin last week, too.

How long can all of this economic resilience last? No clue, but it’s something I plan to put to top retail CEOs while on the ground in Las Vegas to kick off the week at Shoptalk 2023.

I will be sitting down with four executives leading businesses that offer a great snapshot into consumer spending: Foot Locker CEO Mary Dillon, Chewy CEO Sumit Singh, Pinterest CEO Bill Ready and Ulta COO Kecia Steelman.

My interviews will be running throughout Yahoo Finance Live starting at 9 am ET today, so tune in for those economic clues.

I leave you with these thoughts below from two friends in the world of finance. All good things eventually come to an end, which certainly applies to when the Fed is out there raising interest rates into a banking crisis that many would argue they helped sew the seeds of by keeping rates too low for too long.

Can you say false dawn?

  • “The near-term risks to banks combined with uncertainty about deposit outflows, bank funding costs, asset price turbulence, and regulatory issues, all argue for tighter lending conditions and slower bank credit growth over the coming quarters. The economy continues to move from no landing to a hard landing, driven by the lagged effects of Fed hikes, magnified by the adverse effects of the ongoing banking crisis.” Apollo chief economist Torsten Slok

  • “But the worst fallout of the Powell program is yet to come. Powell himself has admitted that monetary policy works with a lag. Yet, despite the recession the Fed is planning for the US economy, Powell admits that there has been no discussion of potential lowering rates later this year despite his recession projection.” Jeffrey Sonnenfeld, Senior Associate Dean and Lester Crown Professor in Management Practice at Yale School of Management, in a new Time post.

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