2/5 Daily Market Note: The Consumer is Very Resilient
The Dip is Bought Again
Hey Folks -
One of the best ways to understand the the consumer landscape in real-time is through credit card spending data from American Express, Mastercard, and Visa. Together, these 3 credit card processing giants capture a lionshare of U.S. spending activity.
I gathered what I believe to be the key takeaways from their recent earnings quarter, and what we’re seeing below is the following:
Table 1: From AMEX, 30 Days Past Due + Net Write Off Rates are increasing, but not at levels that are of concern.
Table 2: Amex Corporate Receivables and Member Loans Past Due are rising but still under pre-pandemic levels
Table 3: From Visa (and Mastercard): Debt Payment Volume Growth is decelerating rather quickly but credit payment volume is very steady.
I view Visa (V), Mastercard (MA), and American Express (AXP) as powerful proxies for forecasting consumer confidence. Any concern over consumer sentiment will show up in these names first.
It is difficult to be outright bearish if these leading consumer companies stay supported along with Semiconductors. Once these two groups reverse, they likely have a rather large impact on the market. As of now, they are firm.
For now, the pattern that we’ve seen throughout the year of intraday dips continues to be in play. Intraday dips are bought and the afternoon session signifies that there isn’t yet a force strong enough to close prices significantly (more than >1%) lower.
Overnight in China, I witnessed tremendous volatility in small/mid cap indices on the Mainland’s CSI 1000 index after policy makers discussed that they would support large cap companies as a preference to smaller companies.
Upon seeing a positive reaction in HK-Listed 9988 (U.S. BABA) in the overnight session, I looked to see if there may be follow-through into the U.S. session today. In my pre-market WhatsApp message to members, I shared my thinking that I liked the BABA 75 Strike Calls with 3-month expiries (when the stock traded 73 in the pre-market).
Those calls today briefly went in-the-money. As of this post, those calls were up anywhere from 15-25%. China positions should be managed very carefully as always based on one’s individual goals.
Will continue to look for opportunity and more is discussed below.
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