Latest news with #GeorgeGoncalves
Yahoo
03-07-2025
- Business
- Yahoo
McDonald's is underperforming. Here's why.
McDonald's (MCD) stock is underperforming as price hikes and a squeezed low-income consumer weigh on store traffic. Yahoo Finance Senior Reporter Brooke DiPalma and MUFG head of macro strategy George Goncalves join Opening Bid to explain how that pressure is creating earnings risks and impacts broader consumer spending. To watch more expert insights and analysis on the latest market action, check out more Opening Bid here. Welcome back to opening bell on Yahoo Finance. Checking in on the markets on this jobs report, uh, I we should say Thursday where the economy showed it created a better than expected 147,000 job, seeing green across the screen as the early vibe off of this jobs report is that it's not too bad, not too good and does not completely remove a rate cut from the Fed, probably at the September meeting. All right, let's fire up our stock of the day, McDonald's. McDonald's shares caught my attention as they have been an unsavory performer of late in the face of a rip-roaring stock market. Stock has down nearly 6% in the past month underperforming the S&P 500s 5% gain. A new note from Guggenheim says the underperformance reflects two factors. One, investors aren't Mclovin defensive stocks at the moment, and two, the low-income consumer remains under financial pressure. Jumping into the Yahoo Finance platform, I find it very interesting that the street remains largely up on Mickey D's when looking at their analyst ratings. This could be the recipe for a negative surprise when McDonald's reports earnings in just a few weeks. Still with me is my round table, Brooke DePalma, Jay Hatfield, and George Goncalves. Um, Brooke, let me start with you because you cover restaurants here for us. You know, earlier in the week, you and I were talking about the move higher in Cava. Um, a lot of optimism, or or some renewed optimism in that stock. McDonald's not the case, underperforming the S&P 500. And, you know, not only is the consumer under pressure, but McDonald's hiked prices really across the board. Yeah, Brian, what we're really seeing here is this struggle for McDonald's both internally, as they look to overcome that E coli outbreak that hit the company last fall. Also, they're struggling to maintain their value leadership, and they have this broad marketing calendar that they're really trying to ramp up heading into the summer, with that reintroduction of snack wraps as they look to regain that leadership. Now, big picture here though, when you think about that big beautiful tax bill that's currently in the house, that also could have implications for the low-income consumer, which is primarily McDonald's audience here. Think about the Medicaid and SNAP cuts that will likely come as as an impact of that big beautiful tax bill, and that can have an impact on just how much low-income consumers have to shop. And when you think about McDonald's, and like you said, compare it to something like Cava, which has more of a broad, wide-ranging key audience where consumers are really looking for value here, we've seen their foot traffic tick up in recent weeks. And McDonald's really stayed flat here, because bottom line here is consumers really want the best bang for their buck. And right now, with McDonald's, maybe they're just not seeing it in this environment. George, let me get over to you. Uh, how challenged from your vantage point is the the the low-income consumer here in in the United States? Look, I I would argue the low-income consumer's probably been in some version of their own recession for the last 18 months in and out, and and they really have not benefited from kind of the broader kind of equity market moves, and just the economy doing relatively well, it hasn't really trickled down. So I do think that the low-end consumer has been, you know, really left behind. I mean, they have really high debt loads. Interest rates matter to them actually even more so, so that's another reason why to cut. So I I do think that that's, you know, holding back the consumer overall. Jay, is it hard to bet on stocks that have any exposure to the low-income shopper here? Well, we do think that that part of the story is pristine. But the the key element to focus on with McDonald's, and we do own it in our large cap dividend fund ICAP, but we're underweighted, is that its beta, or sensitivity to the market, is only 0.35, which is one of the lowest. That's below utilities. So it gets used by institutional investors, mutual funds, as a defensive play. And we're quite optimistic about the market. We have a 6,600 target, and we do think we're going to have a strong July rally, like we normally do. So in that market, you know, as you're seeing today, when the stock market's super strong, the high beta stocks are outperforming their beta, and the low beta stocks are underperforming their beta. So we would be neutral to negative on McDonald's until we get into the normal August, September swoon. And that's when that stock might start working. Jay, let me stay on you. Then, what are you bullish on? We are bullish on really high beta stocks. So we like Broadcom, and all these stocks have betas close to two, so it's twice as risky as the market. So we like Amazon and Broadcom on the tech side. On the financial side, we really love Goldman Sachs and KKR. Uh, KKR sold off during the tariff tantrum. Goldman is benefiting from AI, IPOs, and a slowly growing M&A market. So we're bullish, and both of those stocks, like I said, are are quite high risk. So they're not going to work if we're wrong about the market. So should do well in July. 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Yahoo
03-07-2025
- Business
- Yahoo
Strong June jobs report won't sway Fed on rate cuts: Analyst
The US labor market showed more resilience than expected in June, complicating the interest rate outlook for the Federal Reserve just as cracks in the economy are starting to widen. The economy added 147,000 nonfarm payroll jobs last month, topping the Dow Jones consensus of 110,000, according to the US Bureau of Labor Statistics. The unemployment rate held steady at 4.1%, better than forecasts for a rise to 4.3%. Markets saw initial data as a sign of economic resilience, but the future is still cloudy. 'This was a good number for today,' George Goncalves, head of US macro strategy at MUFG, said Thursday on Yahoo Finance's 'Opening Bid.' "There are still big cracks in the labor market, and we shouldn't overread this report." Goncalves noted that many of the job gains came from non-private sectors, suggesting that underlying hiring momentum in the broader economy remains weak. 'It's a better-than-expected number, sure, and it likely keeps the Fed in a wait-and-see mode,' he said. However, continued weakness in consumer spending and a rise in jobless claims are signs of a cooling economy, per Goncalves. 'In our view, the Fed is still about 100 basis points too tight.' Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments He added that inflation fears, particularly from tariffs, may be overstated. 'We're seeing substitution effects or exporters eating some of the costs. Inflation just doesn't seem like the main issue anymore, it's really about jobs.' There are risks if the Fed waits too long, as consumers are clearly feeling fatigued and stretched, Goncalves wrote in a note prior to Thursday's job report. "Consumer spending trends are falling fast to the lowest level in a decade," he said. MUFG's base claim remains that the Fed cuts rates in July, but today's job upside may delay the action until September. The fastest-growing line of the government's balance sheet is interest expense, Goncalves said, adding that there is a real economic case for lower rates, even if the Fed waits another meeting or two. Read more: How jobs, inflation, and the Fed are all related On the policy front, Goncalves acknowledged the Trump administration has racked up some victories, such as finalized trade deals with the UK and Vietnam, and progress on the sprawling One Big, Beautiful Bill. Treasury Secretary Scott Bessent has called on lawmakers to eliminate the Section 899 provision, commonly known as the 'revenge tax." If passed, the legislation could unlock new federal spending just as the economy begins to stumble, or potentially overheat again, depending on how quickly it gains traction. 'Like it or not, the deals are happening,' Goncalves said. 'The big, beautiful bill will likely pass at some point.' He warned that a short-term boost isn't guaranteed and there may be an economic "gap" during retooling, emphasizing the importance of continued fiscal support. Francisco Velasquez is an Associate Reporter at Yahoo Finance. You can reach him via LinkedIn and X. Click here for in-depth analysis of the latest stock market news and events moving stock prices Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
03-07-2025
- Business
- Yahoo
Strong June jobs report won't sway Fed on rate cuts: Analyst
The US labor market showed more resilience than expected in June, complicating the interest rate outlook for the Federal Reserve just as cracks in the economy are starting to widen. The economy added 147,000 nonfarm payroll jobs last month, topping the Dow Jones consensus of 110,000, according to the US Bureau of Labor Statistics. The unemployment rate held steady at 4.1%, better than forecasts for a rise to 4.3%. Markets saw initial data as a sign of economic resilience, but the future is still cloudy. 'This was a good number for today,' George Goncalves, head of US macro strategy at MUFG, said Thursday on Yahoo Finance's 'Opening Bid.' "There are still big cracks in the labor market, and we shouldn't overread this report." Goncalves noted that many of the job gains came from non-private sectors, suggesting that underlying hiring momentum in the broader economy remains weak. 'It's a better-than-expected number, sure, and it likely keeps the Fed in a wait-and-see mode,' he said. However, continued weakness in consumer spending and a rise in jobless claims are signs of a cooling economy, per Goncalves. 'In our view, the Fed is still about 100 basis points too tight.' Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments He added that inflation fears, particularly from tariffs, may be overstated. 'We're seeing substitution effects or exporters eating some of the costs. Inflation just doesn't seem like the main issue anymore, it's really about jobs.' There are risks if the Fed waits too long, as consumers are clearly feeling fatigued and stretched, Goncalves wrote in a note prior to Thursday's job report. "Consumer spending trends are falling fast to the lowest level in a decade," he said. MUFG's base claim remains that the Fed cuts rates in July, but today's job upside may delay the action until September. The fastest-growing line of the government's balance sheet is interest expense, Goncalves said, adding that there is a real economic case for lower rates, even if the Fed waits another meeting or two. Read more: How jobs, inflation, and the Fed are all related On the policy front, Goncalves acknowledged the Trump administration has racked up some victories, such as finalized trade deals with the UK and Vietnam, and progress on the sprawling One Big, Beautiful Bill. Treasury Secretary Scott Bessent has called on lawmakers to eliminate the Section 899 provision, commonly known as the 'revenge tax." If passed, the legislation could unlock new federal spending just as the economy begins to stumble, or potentially overheat again, depending on how quickly it gains traction. 'Like it or not, the deals are happening,' Goncalves said. 'The big, beautiful bill will likely pass at some point.' He warned that a short-term boost isn't guaranteed and there may be an economic "gap" during retooling, emphasizing the importance of continued fiscal support. Francisco Velasquez is an Associate Reporter at Yahoo Finance. You can reach him via LinkedIn and X. Click here for in-depth analysis of the latest stock market news and events moving stock prices
