Here's what top leaders are telling us about the state of the world and stocks

07/28/2024 19:32

Yahoo Finance has been chatting up all sorts of folks to get a lay of the land in the economy and markets months away from the election.

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Being a top-tier journalist isn't for everyone.

I was reminded of this while chatting with seven-time Gerald Loeb award winner (the highest honor bestowed upon a business journalist), Allan Sloan, on my Opening Bid podcast this week. Sloan — who has been doing this crazy gig for more than 50 years — was recalling intense phone chats he had with then-NYC real estate developer Donald J. Trump.

Other tales he spun include tough questions he posed to bombastic CEOs, and digging into companies to reveal a true picture for investors.

Listening to Sloan reaffirmed to me why (or partly why) I approach everything I do in this field with a sense it may all be taken away tomorrow. At the same time, the conversation was another proof point that if you want to excel, you have to do it way better than your competitor sitting at a similar desk across town or across the country.

And if you can make that extra phone call at midnight to a source, send that one key email at 3 a.m., or take one more meeting at a bar after a long day, it can pay dividends in big ways.

These behind-the-scenes efforts tend to pay off in key moments in the business cycle or markets. Take, for example, this earnings season, where I've been chatting with leaders of public companies and top investing minds at the big banks.

The chats this go around have a different vibe to them, months removed from Election Day.

In the case of some, we are discussing the state of a consumer that has been less confident. In others, we are getting right into concerns about the run-up to the election and what policies may shape profits in 2025 and beyond.

Here's what I am hearing, obtained simply by talking to a lot of people — just like an OG journalist such as Mr. Sloan has done for years.

Otis CEO Judy Marks

Elevator maker Otis (OTIS) didn't have a blowout quarter this week. Instead, the company issued a warning on China demand.

Marks — who also sits on the board of dump truck maker Caterpillar (CAT) — offered up observations on potential new tariffs, which Trump has floated. Our full interview can be seen in the above video.

"I think tariffs impact the American economy. They impact the American citizen no matter what they buy. We've seen that since tariffs have continued to go up regardless of which party wins. We need a pro-growth environment that allows us businesses that are multinational businesses to operate in a high-quality trade environment that everyone understands.

So that we can compete and when we can compete overseas, it drives additional economic growth and jobs here in the US, and that goes across all industries. A trade war, a tariff war, is not in the American economy's best interests, nor in our citizens' best interest."

Whirlpool CEO Marc Bitzer

Appliance giant Whirlpool (WHR) also had a tough quarter, fueled by softness in the US housing market. In talking to Bitzer, I didn't get the sense the company's US business would inflect this year even if the Fed cuts interest rates in the fall.

Note that Bitzer declined to comment on whether European industrial behemoth Bosch has expressed interest in buying the company, as has been recently reported.

"As we internally talk about, interest rates don't change demographic trends or the age of the housing stock. The age of the housing stock is the highest it's been in my history.

Demographic trends are strong. It's the interest rates, mortgage rates, and this famous lock in effect which many consumers experience, which holds everything back. I would, however, be cautious. One interest rate reduction won't unfreeze the market. I think it will take several moves. I would expect that probably you need mortgage rates to be in the five-something range to really see some momentum building."

General Motors CFO Paul Jacobson

Unlike the two names mentioned above, General Motors (GM) did have a very solid quarter — markedly better, I would argue, than Elon Musk's Tesla (TSLA).

No doubt EVs have become politicized this presidential election cycle. Jacobson told me the company is trying to "rise above" the political theater.

He did acknowledge, though, that GM has benefited from the Biden administration's efforts to promote EVs in the country, from building out the charging network to offering a $7,500 tax credit to EV buyers. How that shifts under a potential Trump-led White House is unknown.

"I think we've obviously benefited from some of the jobs incentives and industry creation, but we've created thousands of jobs at our battery cell plants, module assembly, etc. And these are good, strong union jobs by American workers. So we're going to continue to invest. We're in this for the long term because, as we see it, it's about consumer choice."

American Express CEO Stephen Squeri

American Express (AXP) continues to feel the tailwind of younger consumers paying up to be cardholders, in part as it adds more perks (such as these new ones, reported by Yahoo Finance's personal finance team).

That appeared to be enough for Amex to hike its full-year guidance, despite signs of a more cautious consumer. The company is also lifting its full-year marketing budget by a whopping $800 million.

I asked Squeri if he was more cautious on the second half of the year:

"If I was baking in more caution I wouldn't have raised the guidance. I wouldn't be increasing the marketing and so forth. I think that the key point here is the Fed will do what the Fed is going to do probably in September. They are certainly not going to raise rates, they'll probably be cut, they'll probably be another cut before the end of the year. I think that'll help consumer confidence. I think we'll see whatever happens in the election in November, which I don't think anybody has any idea and the reality is, this company has been around 174 years with 30 presidents — we'll get through whatever is we need to get through."

Chipotle CFO Jack Hartung

Hartung will be retiring soon from Chipotle (CMG) after a successful 23-year run as CFO. Very few have done it better.

But before he exits, Hartung did highlight a few challenges on his earnings call this week. One that stood out to me was resistance to higher prices in California after the state raised its minimum wage for food workers.

I'm not used to Chipotle calling out price resistance.

Here's what Hartung told me:

"We did have to increase prices between 6.5% to 7% when we raised wages almost 20%. And what we've seen is not so much resistance. So it's not because the Chipotle burrito costs a little more. There's really reduced spending across the restaurant industry. And when we've looked at it, restaurant companies that took a very high increase [in California] had an impact on sales, about the same as what we've seen. Restaurants that have taken no increase had the same kind of reduction in sales.

So it's really because everything is more expensive. The customer has pulled back on dining out pretty much across the board."

Morgan Stanley chief investment officer Mike Wilson

Wilson lead a large team at Morgan Stanley (MS), and speaks to some of the most influential investors in the world. He's one of the most widely followed strategists on Wall Street, amid years of on-the-mark calls (such as his 2022 bear market prediction).

With tech stocks coming under fresh pressure this week, what Wilson told me on Opening Bid regarding AI stock valuations was intriguing:

"AI is sucking all of the oxygen out of the room. But now I think we are entering that dangerous part of the story where we need to see it in the numbers. I see AI everywhere, except in the numbers. Outside of a few companies where it's obviously been dramatic, it hasn't really driven revenues and earnings anywhere."