How are people feeling about the economy?
If you were to listen to the managements and CEOs of some of the largest companies in the US, you would assume that the world is melting down.
In a round up of the most recent season of quarterly earnings calls, Goldman Sachs strategy research team identified the uncertainty of customers as one of the key themes of S&P 500 managements’ commentaries.
For example, the largest asset manager in the world, BlackRock, noted the lack of conviction among investors.
“Clients do not know what to do with their money,” said CEO Larry Fink during the call.
“They are afraid and they are pulling back as evidenced by more than $55 trillion in bank deposits sitting in the United States, China and Japan alone. And even as markets have rallied recently, many clients have missed that upside and find themselves feeling even further behind.”
Even beyond economics, it appears that CEOs are sensing unrest and worry among Americans. Starbucks CEO Howard Schultz highlighted the social unrest in the US in his firm’s earnings call. Here’s Schultz (emphasis added):
“I think we have a situation where you have a very uncertain election. You have domestic civil unrest with regard to race. And I think the issues around terror have created a level of anxiety. And so, we’re no longer looking at just an economic downturn. There are a number of things that we are facing as citizens, and I think the direction of the country.”
Schultz also added that this is weighing on sales and that “every consumer brand” is impacted.
Steve Easterbrook, the CEO of McDonald’s, also noted much of the same themes as Schultz.
“I think generally, there’s just a broader level of uncertainty in consumers’ minds at the moment, both trying to gauge their financial security going forward,” said Easterbrook. “Whether through elections or through global events, people are slightly mindful of an unsettled world.”
Economic data, such as consumer confidence and retail sales, has slowed in the last week, but this is a very recent development. Citi’s Economic Surprise Index, a measure of whether economic data is beating or falling short of expectations, is still in positive territory and has been for over two months.
So to be fair, these may be just ways to try and place the blame for less-than-stellar earnings or setting up weakness in future quarters by blaming it on something other than their own business.
The widespread concern from such giants, however, is certainly not something to ignore.