Today could be a yawner but.../Cava's take on its consumer/Other notables

My guess is that Jay Powell will continue to be non-committal today on the timing of eventual rate cuts. I say 'eventual' because that is their tilt and bias so I agree with the markets belief of about two this year (100% chance of one priced in and 76% chance of a 2nd by yr end) but just not yet Powell will tell us. So, today could end up being pretty boring and uneventful but we'll still hear about every possible scenario that could result in still holding as is and what would precipitate a cut. On the cut, all it would take is a few months of a rising unemployment rate and I think that's the side of the mandate they will first favor. Markets will initial react to the dots but we all know about the reliability of the dots.

I know there is this kneejerk belief on the part of most to believe rate cuts are good and rate hikes are bad but there is so much more to this. Remember, right now there is $7 Trillion of cash sitting in money markets and at about a 4% interest rate on that is providing income of $280 billion to its holders annualized. This doesn't include all the cash in CD's also earning income at banks which I don't have a figure on. My friends at Quill Research and Danielle Dimartino Booth had a great stat last week in their weekly piece that "70 cents of every $1 of interest income is spent into the economy vs 2 cents of wealth effect growth via their stock market portfolios." Thus, interest rate cuts could actually REDUCE consumer spending on the part of some as their interest income gets trimmed. No free lunch here for those cheering for rate cuts.

In an interview on CNBC with Sara Eisen and Carl Quintanilla, the CEO of Cava gave us insight on the US consumer and what he’s seeing both on the input cost side and price changes to the consumer, among other comments. “In general I think the numbers are indicative of the fog that’s hanging over consumers. You think about all the macro economic fluidity, whether that’s tariff policy, immigration policy, government spending policies, and then you add on top of that all of the geopolitical uncertainty that’s been increasing. And when consumers are in a fog you don’t tend to accelerate or kind of step on the gas. Consumers are looking for that fog to lift to say I have that clarity to lean forward and I think that’s what you saw play through in the numbers.”

“We’ve seen input costs to be pretty benign as it relates to COGS or labor and that’s what we really worked to pass along those savings to our guests. We only took a 1.7% menu price increase in the beginning of this year. No plans to take further price increases. We’ve been able to under price inflation, under price CPI over 800 basis points in the past few years. Really trying to drive that value proposition for consumers when they are in that fog or feeling other price pressures around them.”