Goldman Waves the White Flag on the S&P

In this issue of the peel:

• ?? After a brief bounce, stocks are melting again amid further tariff posturing.
• ?? Goldman Sachs is the first of the major banks to cut its annual S&P forecast.
• ??The soft CPI report still brings investors hope for a Fed cut…or 3.

Market Snapshot

Banana Bits

• It’s that time of year again. Here’s your potential government shutdown survival toolkit.
• Geopolitical drama is unfolding between Greenland and the U.S.
• Check out Goldman's (and a bunch of other banks) forecasts for the S&P.
• Egg prices are finally coming back down to Earth, but for how long?
• Take a trip down memory lane by checking out a history of stock market crashes and recoveries.
• Dollar General is set to benefit from higher-income earners looking to trade down for value.
• The most pertinent news by far of this whole tariff debacle is the impact it will have on alcohol prices.

Alexa, Ring, Nest, Apple, Roku…

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?? $10M+ in revenue and growing 200% year-over-year

?? In 127 Best Buy locations, with Home Depot launching in 2025

?? 10+ patents protecting industry-leading technology

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Macro Monkey Says

Goldman’s Crystal Ball?

In the ever-entertaining world of financial forecasting, Goldman Sachs has decided to play the role of the cautious oracle. The investment giant recently trimmed its year-end S&P 500 target from 6,500 to 6,200.?

The culprits? A mix of economic uncertainties, particularly those stemming from the Trump administration's tariff policies, and a recent market sell-off that has left investors gasping for air.

Source

While Goldman is the first bulge bracket to do so, they aren’t the only prophet in the village adjusting their vision:

• Ed Yardeni of Yardeni Research has also taken a red pen to his S&P 500 target, lowering it to a range between 5,800 and 6,400. His reasoning? Potential stagflation, unpredictable policies, and the market's recent roller-coaster ride.
• HSBC has thrown in the towel on U.S. equities, downgrading them to "neutral." Instead, they're now sweet on European stocks, citing Germany's fiscal leniency and a proposed $1.2 trillion European stimulus as the cherries on top. ?

Source

Meanwhile, JPMorgan is playing the contrarian card, suggesting that the recent market dip isn't about recession jitters but rather the antics of hedge funds adjusting their positions. They hint that the worst might be behind us, with the potential for a relief rally on the horizon.

So, what's an investor to do amidst this forecasting frenzy? Perhaps it's best to remember that even the most seasoned analysts can't always predict which way the wind will blow. And after all, stocks have a very long history of rallying hard after downturns.

Career Corner

Question

"How would you value a cow?"

I could DCF, precedents, and comps this, but how do you justify to the interviewer that you chose one methodology over another (or do you mention that you would use an array of valuation methodologies to produce a range)?

You could DCF a cow with beef as the terminal value and milk as the future cash flow, but how would you actually wrap up the answer cleanly to the interviewer?

Answer

Any of these answers work. Explain and weigh the pros and cons and pick one. The question is designed to test how you think, and if you fumble with a slightly out-there question, do not look for one specific answer out of the 3.

Also, a good opportunity to show a little personality/humor, given the prompt… Way to differentiate yourself from other candidates in the way you talk about the methods and can clue that you’re “in on the joke.”

There’s a trope about MF PE modeling that they get so granular they do DCFs to determine the amount of coffee offices should be ordering… This type of question in the abstract has that kind of flavor.

Head Mentor,?WSO Academy

Check out WSO Academy

What's Ripe

Intel (INTC) 14.6%

• Shares surged following the announcement of a new CEO, bringing renewed optimism to the company's strategic direction. Looks like Intel found the right chip off the old block.

Metals & Mining Stocks (FQVLF) 14.1%

• As gold prices hit record highs amid market volatility, mining companies like Barrick and First Quantum are striking it rich. When the market gets rocky, gold miners dig in.

What's Rotten

UiPath (PATH) 15.9%

• Shares plummeted after the company issued a weaker-than-expected revenue forecast, citing federal spending cuts and macroeconomic uncertainties. Looks like UiPath's automation couldn't dodge the budget axe.

Adobe (ADBE) 13.9%

• The stock tumbled following a mixed earnings report and a cautious outlook on AI monetization. Even Photoshop couldn't brush away these losses.

Thought Banana

When tight budgets meet tight aisles

As inflation continues to stretch wallets thinner than a bargain-bin plastic bag, consumers are flocking to discount retailers like Dollar General and Dollar Tree. These budget-friendly bastions are experiencing a surge in popularity, proving that when the going gets tough, the tough go shopping—for deals.

The Dollar Defense

• Rising Foot Traffic: U.S. dollar stores continue to see YoY growth in visitors despite higher inflation, or perhaps, as a result of it.
• Expanding Product Lines: Dollar General is set to introduce approximately 100 new private-label products in the first quarter of 2025, primarily under its Clover Valley brand, offering consumers more affordable choices.
• Attracting Diverse Shoppers: While traditionally catering to lower-income customers, these stores are now drawing in higher-income shoppers seeking value amid economic uncertainty.

Source

Economic Pressures

• Inflation Impact: Persistent inflation has led consumers across all income levels to become more price-sensitive, driving them toward discount retailers.
• Shift in Spending Habits: Shoppers are prioritizing essentials and seeking out deals, a trend that benefits retailers offering everyday low prices.

In these challenging times, it seems the humble dollar store has become the hero we didn't know we needed. Who knew that navigating narrow aisles stocked with off-brand cereal and discounted holiday decorations could be the key to financial resilience??

So, here's to finding treasure in the discount aisles and embracing the thrill of the bargain hunt. After all, when life gives you lemons at half price, make budget-friendly lemonade!

The Big Question: Are discount retailers the new economic safety net or just a temporary inflation hack?

Banana Brain Teaser

Previous

60% of the members of a study group are women, and 45% of those women are lawyers. If one member of the study group is to be selected at random, what is the probability that the member selected is a woman lawyer?

Answer: 0.27

Today

Each year for 4 years, a farmer increased the number of trees in a certain orchard by ? of the number of trees in the orchard the preceding year. If all of the trees thrived and there were 6,250 trees in the orchard at the end of the 4-year period, how many trees were in the orchard at the beginning of the 4-year period?

Send your guesses to [email protected]

?

The most important quality for an investor is temperament, not intellect.

Warren Buffett

How Would You Rate Today's Peel?

?? All the bananas

?? Meh

?? Rotten AF

Happy Investing,

Chris, Vyom, Ankit & Patrick