Résumé: Today we run down another solid session for the US market, with enthusiasm in abundance on the Nvidia investment in Intel, a development we discuss with Saxo Equity Strategist Ruben Dalfovo, together with the surge in ASML and Crowdstrike yesterday. Also, a preview of some names reporting next week, including recent darling Micron, key developments in FX as the US dollar is on the comeback path and the JPY churns post-BoJ. Today's pod hosted by Saxo Global Head of Macro Strategy John J. Hardy.
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An auspicious time to be tactically bearish? The eastern border with Russia is hardening What if that expensive AI gear is short-lived already does not age well in ROIC terms… Today in silly, but funny AI images. Darden shares stumbled badly after reporting earnings. The bad news in much of the coverage was merely a modest miss in comparable sales numbers for its flagship Olive Garden restaurants - which rose 5.9% rather than the consensus 6.1%. It was also a deceleration from the 6.9% comparable sales growth of the prior quarter. But perhaps something else is afoot here. On the pod I mentioned that the company is rolling out out lower priced menu options at a lower price point at Olive Garden restaurants to see if it can increase traffic at its restaurants. Initial efforts are “encouraging” according to Darden. The Bloomberg article mentions that a stunning 44% of American adults order from kids menus to save money and possibly for smaller portions, also speculating on the possible impact of weight-loss drugs on sizes of appetites. Maybe that is adding a bit to the negative reaction here. Something to follow up on in the future. In general, if people are simply eating fewer calories, growth in any business related to sheer volumes being eaten and drunk will face strong headwinds - especially once the pill forms of GLP-1 medications become widely (and cheaply) available. The obesity treatment transformation is in its early days.
Here is a comment spotted on Le Shrub’s substack pointing out that market corrections not long after the Fed starts cutting cycles are quite common. Don’t forget even further back when Greenspan did the surprise inter-meeting 50-bp cut on January 2, 2001. Very different setup then, of course, the market had been cratering for months into that rate cut. It did managed to spark a rally, if one that peaked out 16 trading days later before more brutal drawdowns ensued.
Poland has closed its border to rail traffic indefinitely, disrupting tens of billions of euros of imports into the Eurozone from China.
Hyperscaler hangover risk. All of that AI data center capital spend is not only expensive, but needs to pay for itself very quickly - those rapid writedowns on expenditures are expensive for hyperscaler balance sheets.
Apparently, making photorealistic AI images of famous people (odd combinations of famous people, to be specific) standing in a grocery store aisle is a thing. I nearly choked on my coffee when I saw this hilarious one. Dumb, yes. Funny, yes please.Chart of the Day - Darden Restaurants (DRI)
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