It Girl Identity: Issue 6

It Girl Identity Newsletter

Grab your iced latte and read what's moving markets this week, a detailed guide to starting an equity portfolio, and enjoy our curated It Girl Identity recommendations!

What’s Moving Markets

This week’s highlights include a continuation on major bank earnings, retail sales and job claims data, and an update to a major deal!

What’s Up

• BlackRock (BLK): The undisputed leader in ETF investing, with assets under management exceeding $10 trillion. Recent acquisitions like Preqin and Global Infrastructure Partners enhance data capabilities and access to private markets, driving future growth prospects. Despite flat stock performance, strategic moves in 2024 position BlackRock for potential record results.

• Builders FirstSource (BLDR): Climbed 7.46% on the same optimism regarding rate cuts.

• Corning Inc (GLW): Corning rose 19% after seeing strong adoption of its glass products in generative AI technology.

• Costco (COST): Raises membership fees after 7 years; stock initially up on strong sales, later drops 4.3%. Annual fees to increase: basic to $65, executive to $130, amid inflationary spending cutbacks.

• D.R. Horton (DHI): Soared 7.24% amid hopes of rate cuts easing the housing market.

• Hims & Hers (HIMS): Hims & Hers gained 4% after releasing a generic, cheaper GLP-1 drug due to low supply of market dominators Ozempic and Wegovy.

• MicroStrategy (MSTR): Surged 4.05% on plans for a 10-for-1 stock split.

• Pfizer (PFE): Rose 1.08% after announcing development of a once-daily weight loss pill.

• QuantumScape (QS): Up 30.87% on a deal to supply solid-state batteries to Volkswagen.

• Top S&P 500 Gainers: Enphase Energy (ENPH) led gainers with a 23% increase, followed by Corning (GLW) and Builders FirstSource (BLDR) each rising 19% and 15%, respectively. Mohawk Industries (MHK) and D.R. Horton (DHI) also saw gains of 15% and 13%, respectively.

What’s Down

• Boeing (BA): Boeing to plead guilty to defrauding U.S. government over 737 MAX crashes, facing $487.2M fine and $455M for safety programs. Legal impact on defense contracts uncertain.

• Bulge Bracket Banks: Wells Fargo (WFC) dropped 6%, JP Morgan (JPM) 1.2%, and Citibank (C) 1.8% after posting their earnings. Overall, results showed. The benefits from higher interest rates have plateaued, making it harder to adjust to increased rates and reducing consumer spending, which may lead to delinquencies on loans. This is unfavorable for customers, with higher card delinquencies noted. Additionally, card borrowing is rising more than spending, indicating a lack of anticipated financial gains.

  • Delinquencies: Delinquencies refer to late or missed payments on loans or credit accounts. They indicate that borrowers have not paid their debts according to the agreed-upon schedule, which can negatively impact their credit scores and financial standing.

• Delta Airlines (DAL): Delta also lost 5% after releasing its earnings and reporting quarterly loss of 29%, leading competitors Southwest and American lower as well. CEO Ed Bastian attributes its loss to the general trend of airlines over-expanding their operations to compensate for the sudden boom in travel demand.

• Tesla (TSLA): Tesla dropped 8% after delaying plans for Robotaxi, but still closed the week with a gain of 0.21%.

• Top S&P 500 Losers: Chipotle Mexican Grill (CMG) and Meta Platforms (META) each experienced an 8% decline, while Netflix (NFLX) and ServiceNow (NOW) saw decreases of 6%. Delta Air Lines (DAL) rounded out the top losers with a 5% drop in the S&P 500.

Markets and Economy

• U.S. Market Performance Highlights: The S&P 500 hit its 37th record close of the year and the Dow Jones also reached a record high on Friday after earnings from Wall Street banks and optimism that the Federal Reserve will lower interest rates. As investors shift away from larger cap stocks to smaller companies due to growing possibility of a rate cut, the Russell 2000 rose 3.6%.

• Cooling Inflation Data: Both monthly and yearly core CPI numbers were 0.1% lower than their forecasts. While the numbers are still above the Fed’s target, Jerome Powell hinted closer at lowering interest rates as the market prices in a 78% chance of a September rate cut.

• Slowing US Consumer Spending: US consumer spending growth slowed to 2.6% in April compared to last year. Consumers are supported by a strong job market, growing household wealth, and manageable debt levels. While the labor market has shifted from "extremely tight" to "still fairly tight," Goldman Sachs Research forecasts 175,000 new jobs per month for the rest of 2024. Rising unemployment can potentially dampen spending growth by about 0.6 percentage points per percentage point increase. Despite these risks, Goldman Sachs Research believes the likelihood of a recession remains low at approximately 15%, aligning with historical averages. This suggests a soft landing outlook for both consumers and the economy remains the most probable outcome.

  • A "soft landing" in this context means a gradual economic slowdown that avoids a recession. It involves a controlled adjustment where economic activity moderates smoothly, maintaining stability in key indicators like consumer spending, employment, and overall economic health. This scenario aims to minimize disruptions and ensure a sustainable transition to slower growth rates.

Mergers and Acquisitions

• Paramount (PARA) x Skydance Media Deal: Paramount Global's merger with Skydance Media represents a major change after some dramatic turns. Initially, Skydance and its partners will acquire Paramount's parent company, National Amusements, for $2.4 billion in cash. The next phase will merge Skydance with Paramount, offering $4.5 billion ($23 per share for Class A ticker: PARA and $15 for Class B) and an additional $1.5 billion to bolster Paramount's financial position. Paramount has 45 days to entertain competing offers, and regulatory approvals may prolong the closing process by several months.

IPOs

• SHEIN Pursuing London IPO: is pursuing a London IPO, committing $250 million over the next 5 years to support European designers and circularity measures. This includes a €200 million fund for textile recycling and co-investment opportunities, along with €50 million to aid UK and EU fashion brands and support its Shein X incubator program. These initiatives are part of SHEIN's strategy to rebrand itself from a fast fashion giant and go public, following its withdrawal from a US IPO amidst controversy over labor practices. Additionally, SHEIN is relocating its headquarters from China to Singapore to manage regulatory challenges and tariffs on Chinese products.

  • IPO (Initial Public Offering): The first time a company sells its shares to the public on a stock exchange, allowing investors to buy a stake in the company.

Earnings Calendar

This week is packed with high-profile corporate earnings reports! Keep an eye out for earnings updates from several major bulge bracket banks.

This Week's Major U.S. Economic Reports & Fed Speakers

Here is a quick breakdown of this week’s Fed Speaker events and economic indicators, what they mean, and their forecasted results!

Monday, July 15

Speakers: Fed Chairman Jerome Powell

• July Empire State Manufacturing Survey: The survey rates the relative business conditions. Forecast: -6.0 (Previous: -6.0).

• Survey of Consumer Expectations’ Credit Access Survey: Shows consumers’ expectations regarding credit demand and access. (Previous loan application rate: 43.4).

Tuesday, July 16

Speakers: Fed Governor Adriana Kugler

• June U.S. Retail Sales: Advance estimates of the total receipts of retail sales. Forecast: -0.2% (Previous: 0.1%).

• June Business Leaders Survey: Provides information on recent and expected trends in key business indicators. (Previous: -4.7%).

• June Import Price Index: Measures changes in prices of imported goods and services. Forecast: -0.1% (Previous: -0.4%).

  • June Import Price Index, Minus Fuel: (Previous: -0.3%).

• May Business Inventories: Measures changes in domestic retail trade, wholesale trade, and manufacturers’ activities. Forecast: 0.5% (Previous: 0.3%).

Wednesday, July 17

• June New Residential Construction:

  • June Housing Starts: Forecast: 1.30 million (Previous: 1.28 million).

  • June Building Permits: Forecast: 1.39 million (Previous: 1.39 million).

• June Industrial Production and Capacity Utilization:

  • June Industrial Production: Forecast: 0.2% (Previous: 0.9%).

  • June Capacity Utilization: Forecast: 78.4% (Previous: 78.7%).

• Outlook-at-Risk: Measures downside risk to real GDP growth, upside risk to the unemployment rate, and risks to CPI inflation.

Thursday, July 18

• Initial Jobless Claims (July 13): Number of people filing for unemployment benefits for the first time. Forecast: 228,000 claims (Previous: 222,000).

• Philadelphia Fed Manufacturing Survey: Measures business activity. Forecast: 2.9 (Previous: 1.3).

Friday, July 19

Speakers: New York Fed President John Williams, Atlanta Fed President Raphael Bostic

Sources: Wall Street Journal, MarketWatch, New York Fed, Reuters, CNBC, Goldman Sachs Briefings

How to Construct an Equity Portfolio

In last week’s newsletter, we covered how to open an investment account. This week, we’re taking it a step further by guiding you through the process of what to include in your investment portfolio. 

Disclaimer: Information shared here is for educational purposes only. Consult a financial advisor for personalized advice.

There are multiple ways to create a portfolio, so here is a simple strategy if you are first starting with equities: 

Analyze the Macroeconomic Conditions: Start with a macroeconomic approach by assessing economic indicators (interest rates, unemployment, CPI inflation) to determine the historical, current, and future economic environment. For example, currently, interest rates are high at 5.25% to 5.50%, unemployment is 4.1%, and CPI is slightly high in tune with inflation at about 3%. Using this information, you can now decide if index funds are right for your portfolio at this moment. Here are some examples of how economic indicators affect index funds: 

• Interest Rates: Low rates can make index funds more attractive due to cheaper borrowing costs, while high rates might make bonds more appealing.

• Unemployment: Low unemployment usually means the economy is doing well, which can be favorable for index funds. High unemployment can signal economic trouble (for example: COVID times).

• Consumer Price Index (CPI): Tracks inflation. Moderate inflation can be positive for stocks, but high inflation minimizes returns, consumer spending, and purchasing power.

Assess Your Risk Level: Ask yourself if you are willing to take more risk and have a more hands-on approach to your portfolio, or if you want a more hands-off/not-as-risky portfolio. A portfolio in equities with a low-risk tolerance will allocate more cash to index funds and less to individual companies and vice versa.

Identify Investment Opportunities: After investing a percentage of your portfolio in index funds, research what specific public companies you want to invest in. To begin this process, use the macroeconomic data you gathered above, and look at what specific sectors you believe will outperform in the upcoming months or years. Some sectors are strongly correlated with interest rates, while others have more specific catalysts. 

Here are some examples of sectors that are in the S&P. The S&P 500 is divided into 11 sectors:  

• Information Technology: Includes companies that produce software, hardware, and semiconductors, as well as those that provide information technology services. (Ex: Apple)

• Health Care: Includes biotechnology companies, hospital management firms, medical device manufacturers, and pharmaceutical companies. (Ex: Eli Lilly)

• Financials: Covers a range of financial services, including banks, investment funds, insurance companies, and real estate firms. (Ex: JPMorgan)

• Consumer Discretionary: Consists of businesses that tend to be the most sensitive to economic cycles, such as retailers, automotive companies, and leisure companies. (Ex: Ulta)

• Communication Services: Includes telecommunications firms, media companies, and internet service providers. (Ex: Alphabet/Google)

• Industrials: Includes manufacturers and distributors of capital goods such as aerospace and defense, building products, engineering, and construction firms. (Ex: Boeing)

• Consumer Staples: Covers companies whose products are less sensitive to economic cycles, such as manufacturers of food, beverages, and tobacco, along with producers of non-durable household goods and personal products. (Ex: Coca-Cola)

• Energy: Includes companies involved in the production and distribution of energy, including oil, gas, and renewable resources. (Ex: Exxon)

• Utilities: Consists of electric, gas, and water utilities, as well as integrated providers. (Ex: Duke Energy)

• Real Estate: Includes companies involved in real estate development and operations, as well as real estate investment trusts (REITs). (Ex: Simon Property Group)

• Materials: Comprises companies that produce chemicals, construction materials, metals, paper, and packaging products. (Ex: Newmont Corp)

After choosing a few sectors that sound intriguing, you can dive deeper into the sub-sectors within them. For example, within healthcare, you can invest in pharmaceutical companies, medical care companies, or biotechnology companies. Each sub-sector brings its specific risk-to-reward ratio and it is up to the individual investor to assess their risk tolerance and proceed. 

Analyze Company Performance: When looking at specific companies, you can use their financial statements to quickly analyze the business. On a company's most recent 10-k (annual report), they will post their three updated financial statements, the income statement, the balance sheet, and the cash flow statement.

Bonus Tip: For a visual explanation, watch our episode on financial statements as part of our Financial Analysis Series on TikTok!

Vocabulary:

• Index Fund: Collection of stocks that helps minimize risk in your portfolio as it provides diversification and price stability.

• Real Estate Investment Trust (REIT): A company that owns, operates, or finances real estate.

It Girl Recommendations

Shop Our Other Recommendations Here: health, fashion, fitness, education, beauty, and skincare...

Caroline Ellis Art:

• Caroline Ellis Art: Started by Dallas artist Caroline Ellis, offers fabulous, chic, and retro-inspired art prints that are sure to light up your living space! Featuring vibrant and feminine collections like Dive In, City Matchbox, Poolside, Ladies’ Game Night, and Aprés-Ski, there are eye-catching art pieces for everyone. Her prints are best styled above a bar-cart, bed, or any blank wall that is in need of a pop of color. All of her designs are hand-drawn or mixed-media collaged and are perfect for your next apartment, dorm room, or home. 

• Visit Here to Shop!

Iced Latte Recipe:

Ingredients 

• 1 shot of espresso (about 1 oz)

• 1 cup of cold milk (any type you prefer)

• Ice cubes

• Sweetener (we like to add Stevia to our coffee!)

Instructions

• Brew a shot of espresso using an espresso machine or a stovetop espresso maker.

• Fill a glass with ice cubes.

• Pour the shot of espresso over the ice cubes.

• Add cold milk to fill the glass, leaving room for stirring.

• Stir well to combine.

• Add sweetener if desired, and stir again.

• Enjoy your refreshing iced latte!

Financial Fashion

To round off this week’s edition of IGI, we’ll share some of the hottest corporate-friendly dresses in the market to keep you cool in this summer heat! Shop these looks below:

• Top Left (Reiss)

• Top Right (Zara)

• Bottom Left (Meshki)

• Bottom Right (Nobody’s Child)

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See you next Monday, It Girls!

With Love,

It Girl Identity