Succinct Summation of the Week's Events

Succinct Summation of the Week's Events:

Positives,

1)We now have one trade deal (letter of intent actually) on the board. Hopefully something good comes of the US/China de-escalation talks this weekend.

2)The April ISM services index rose to 51.6 from 50.8 and better than the estimate of a dip to 50.2 and compares with 53.5 in February and 52.8 in January. For perspective, the 6 month average is now 52.5. With regards to overall sector breadth, 11 saw growth vs 10 in March and 14 in February. Six saw their business contract.

3)Initial jobless claims fell back to 228k from last week's print of 241k and 2k below expectations. Continuing claims fell to 1.879mm off the highest since November 2021 in the week before at 1.908mm.

4)I understand the growing economic risks, which I completely share, but I just don't see how Jay Powell could have handled the meeting this week any differently.

5)Helped by a dip in mortgage rates, purchase applications lifted by 11.1% w/o/w after 3 weeks of declines. Refi's were up by the same amount and also after 3 weeks down.

6)We'll see in the future if this demand is a sign of consumer budget weakness or not. From Affirm: "Demand for Affirm remains excellent: y/o/y GMV (gross merchandise value) growth accelerated for the third consecutive quarter, including a strong March, which continued into April. Credit outcomes are in line with our predictions, and as always, we are watching attentively for any indicators of macroeconomic stress, and fine-tuning the settings of our models continuously."

7)From Wynn Resorts: Their Vegas business is still doing well as "April RevPAR was up slightly from 2024, slot handle was up, and group activity was as expected. So, the business through April felt pretty good. And the visibility we have into forward demand, which is primarily through our group and convention business, also looks just fine. Of course, the booking window in other channels is much shorter than group, and so we are watching those channels carefully." Macau saw almost 100% hotel occupancy and "the business in Q1 felt very good...But again, the booking window there is short, and we are watching customer activity day-to-day. Long story short, recent results have been good, but we have to acknowledge the uncertainty out there and the impact that uncertainty may have on demand."

8)From Marriott: "RevPAR in the US and Canada region rose over 3% with our luxury and full service hotels meaningfully outperforming select service properties, thanks to solid demand across both group and transient guests. International RevPAR was up nearly 6% led by growth in APAC."

9)From Disney: "Operating results at our domestic parks and experiences increased compared to the prior year quarter primarily due to growth at our domestic parks and resorts and, to a lesser extent, Disney Vacation Club and Disney Cruise Line." Helping too was "an increase in guest spending due to higher spending at our theme parks."

10)From Madison Square Garden Entertainment: They saw gains in revenue and operating income that "reflected our success in attracting a wide variety of special events, family shows, and marquee sports to our venues, robust ongoing demand for our premium hospitality offerings and the conclusion of this year's record setting Christmas Spectacular run in January. And while our business experienced a y/o/y decline in the number of concerts at our venues this quarter, we remain on track to grow the overall number of bookings events this fiscal year...From a demand standpoint, the majority of concerts at our venues continued to sell out during the quarter. In addition, food and beverage per caps at concerts at the Garden were up, while per caps at our theaters were essentially unchanged as compared to the prior year quarter."

11)From Doordash: "we haven't seen any changes in consumer behavior, even if there are changes in consumer sentiment. I've always believed, and I think we saw this - whether it was during things returning back to normal after Covid or peak inflation in '21 or '22, I think what you really saw was that food - or getting convenience delivered really is the most frequent form of spend in consumption, and food really is the most resilient category. We continue to believe that. We continue to see signs of that."

12)From Tapestry: They had a solid quarter with help globally. They said the handbags business has "proven to be durable over time because of the emotional connection that consumers have with our category." And, they are picking up more Gen Z customers.

13)From Shopify: "While our merchants proudly serve consumers across all income brackets, their buyer base skews towards higher income consumers, with more than half of their buyers in the US having incomes exceeding $100,000. We believe this helps insulate our merchants from some of the potential swings in pricing or other market factors, as higher income consumers tend to be less price sensitive. We acknowledge the uncertainty ahead and are actively monitoring our data to help us support our merchants and adapt to whatever changes may arise...Keeping all this in mind, let's now turn to the outlook. Our GMV data shows continued strength through April and early May, reinforcing our confidence in outperforming the market."

14)From Avis Budget: "Overall, our rental days were in line with TSA activity y/o/y. We did, however, see a pullback in commercial demand as we transition through the quarter. This was mitigated by improved leisure demand and meaningful y/o/y volume growth with our valued partners, a trend that continued in April and will remain an area of emphasis for us moving forward."

15)From CDW: "Broadly speaking, customers remained focused on mission critical projects and must to-do's and their priorities were consistent with 2024, laser focused on operating efficiency and expense elasticity with one addition, client device prioritization, which reflected three factors: need for refresh, the upcoming Windows 10 expiration and the desire to get ahead of tariff related price increases...Federal government market growth was subdued throughout the quarter as agencies digested the impact of new policy priorities, while education growth accelerated towards the end of the quarter, driven by Chromebook demand ahead of potential price increases."

16)From Uber: "We're not seeing trade downs in terms of the kinds of restaurants that our eaters are eating at...And remember, the categories that we operate in, these are restaurants, transportation, grocery, tend to be categories that are quite consistent even during periods of macro uncertainty."

17)From Ferrari: "Please bear in mind that Q1 '25 results were not impacted in any way by the recent introduction of higher tariffs on EU cars imported in the US. Revenues and profitability grew double digits with shipments slightly higher than the previous year and product mix and personalization as the main drivers of growth."

18)From Ford: "Relative to adding manufacturing capacity in the US, for Ford, this is a continuation, not a course correction. Since 2020, we have invested $50 billion in manufacturing capacity and we have a lot of investments in-flight, including manufacturing and battery capacity in Tennessee, batter capacity in Kentucky and Michigan and manufacturing capacity in Ohio."

19)China's exports in April rose 8.1% y/o/y which was 4x the 2% estimate because of increased shipments to everyone but the US. They plunged 21% to the US while rising by 8% to the EU and by 20% to Southeast Asian countries.

20)Reflecting also the large amount of pull forward ordering, Taiwanese exports spiked by 30% y/o/y in April, well higher than the estimate of up 16%.

21)Pull forward here too, German factory orders in March rose 3.6% m/o/m, well above the estimate of up 1.3%. The breadth of orders seemed to be broad.

22)In Vietnam's also as April exports jumped 19.8% y/o/y, well better than the estimate of up 11.9%. Imports were higher by 22.9% vs the forecast of up 17%.

23)The Bank of England cut rates by 25 bps as expected to 4.25% in a 5-4 vote where two wanted a cut of 50 bps and two preferred no change. They said "There has been substantial progress on disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilized longer-term inflation expectations...Progress on disinflation in domestic price and wage pressures is generally continuing." They are though neutral on what happens next.

24)The Swedish Riksbank and Norges central bank held policy unchanged as expected.

25)The PBOC cut its 7 day reverse repo rate by 10 bps to 1.40%. This is their benchmark rate and also trimmed the reserve requirement ratio by 50 bps to 6.2%. They estimate this RRR cut will result in an extra 1 trillion yuan (about $138b) of fresh liquidity.

26)The Chinese consumer is not laying down as the Golden Week visitation figures out of Macau rose sharply. According to Inside Asian Gaming, "it was Friday that saw a massive surge when 221,968 visitors entered Macau - a new record for the highest single day number of visitors to Macau since the pandemic. It was also the highest single day entry figure since February 2019...Compared to the 604,395 visitor arrivals during last year's May Day Golden Week, this year saw an increase of around 33%."

27)The final April Eurozone services PMI was revised to basically the flat line of 50.1 vs the initial figure of 49.7. Spain and Italy on the services side continue to outperform Germany and France, helped by tourism. The UK services PMI was left little changed at 49 but the first time its below 50 since October 2023.

28)More optimism about the Eurozone economy was apparent in the Sentix Eurozone economic confidence index that rose to -8.1 from -19.5 and above the estimate of -11.5. It's actually back to the average over the past 6 years which captures pre Covid data. The Sentix said "The dust is settling...Investors are acknowledging the calm response to US tariffs so far" and they believe that "the main victims of Trump's tariff policy are the US economy and, to some extent, the economies of China and Switzerland. However, the period of uncertainty is probably not over yet."

Negatives,

1)My 6:45am Phoenix to Newark flight today is now scheduled to take off at 12:50pm, assuming it doesn't get delayed for a 6^th time. When will enough lessons be learned that crucial services like mail, rail and airlines, among others, in the US should be privatized? This is currently 3^rd world type reliability.