By Ryan O'Rourke on February 9, 2024

Friday Five

Happy Friday February 9th!

The S&P 500 is poised to close above 5,000 for the first time!  Predicting changes in interest rates can be a fool’s errand.  Spirit sales outpace beer and wine…again.  Super Bowl LVIII: Patrick Mahomes and the Chiefs look to move into dynasty status by winning back-to-back Super Bowls and their 3rd in 5 years.  Inflation could curtail Super Bowl party food.

#1 – Weekly Market Recap – The S&P 500 briefly crossed the 5,000 level during the trading day yesterday and appears poised to close above 5,000 for the first time today.

Through yesterday’s close, the Nasdaq was up +0.8% while the Dow Jones was up marginally at +0.2% for the week. 

Strength in the technology sector continued to propel stock indexes higher.  As you can see in the chart below, last year’s top performers continue to rise so far this year.

Whether or not strong corporate earnings, persistent economic growth, and the hope for interest rate cuts is the goldilocks scenario that investors have been hoping for will be revealed over time.  But for now, investors appear content to ride the wave of stock market enthusiasm.

#2 – Interest Rate Unpredictability – As Wall Street braces for potential shifts in interest rates, investors find themselves in a familiar pattern of anticipation and uncertainty.

History cautions investors not to place too much confidence in predictions of interest rate changes. As shown in the graph below from the Wall Street Journal, investor’s attempts to accurately predict interest rates changes were often misguided.   The anticipation of interest rate cuts has routinely clashed with underlying economic data, often leading to misplaced investment decisions.   

WSJ (2/8/2024)

The futures market is currently pricing in a 21% chance of a rate cut in March, down from 62% before the January 29th Federal Reserve meeting.  Last Friday’s strong job report and manufacturing data have all but cemented a delay in interest rate cuts.  

At DSG Advisors, we have consistently been writing that we believe interest rates would need to stay “higher for longer” and that investors appeared too optimistic in the prediction of March rate cuts.  We continue to believe that focusing on high quality stocks with attractive valuations, and accelerating earnings growth, will reward investors…whenever the rate cuts actually occur.

WSJ

#3 – Make It a Double – For the second year in a row, US spirits sales outpaced beer and wine sales. Although the spirits industry revenue grew only at a modest 0.2% last year to $37.7 billion, according to the Distilled Spirits Council of the United States (DISCUS), it outpaced beer and wine sales 0.4% and 26.1% respectively.

Source: CNBC & Distilled Spirits Council of the United States (2/7/2024)

Chirs Swonger, DISCUS President and CEO, attributed the challenging sales environment to several factors including difficult economic conditions with high inflation and interest rates reducing consumer discretionary spending.

“The spirits sector showed resilience in 2023, navigating through the choppy wake of the pandemic and maintaining our market share lead of the total beverage alcohol market,” Swonger said. “The phenomenal sales growth we saw during the pandemic was unprecedented and unpredictable but also unsustainable, and now, the spirits market is recalibrating.”

Consumers continue to flock to vodka, the top-selling spirit in 2023, as shown in the chart below. While high-end tequila and mezcal, gained even more of a lead on American Whiskey.

Americans seem to love the convenience of a ready-to-drink cocktail, which is the fastest growing spirits category, rising 26.7% to $2.8 billion in revenue.

Source: CNBC & Distilled Spirits Council of the United States (2/7/2024)

CNBC

#4 – Super Bowl LVIII – For the second time in five years, the San Francisco 49ers and the Kansas City Chiefs will match up in the Super Bowl.  This year’s big game, Super Bowl LVIII, will be played in Las Vegas at Allegiant Stadium.

The two teams faced off four years ago with the Chiefs coming away with the victory. On Sunday, the 49ers seek to avenge their 2020 loss to the Chiefs while Patrick Mahomes hopes to move his name up the list of greatest quarterbacks of all time.

The Chiefs are considered the NFL’s current dynasty, playing in their fourth Super Bowl appearance in five years. They beat the Eagles in 2023, lost to Tom Brady and the Buccaneers in 2021, and beat the 49ers in 2020.  They are looking to become the first team since the 2003-2004 New England Patriots to repeat back-to-back Super Bowl wins.

Chiefs head coach, Andy Reid, is looking for his third Super Bowl win while 49ers head coach, Kyle Shanahan, is still in search of his first win.  

If you’re planning on placing a Super Bowl bet, as of Thursday afternoon, the 49ers are a 2-point favorite to bring home the Lombardi Trophy. Of course, with the prevalence of on-line betting, bets can now be made on anything from the coin toss, the color of the Gatorade dumped on the winning coach, or even the time of Reba McEntire’s rendition of the Star-Spangled Banner. In fact, according to a survey by the American Gaming Association, people across the US will bet an astounding $23.1 billion on the Super Bowl this year.

CBS Sports

ESPN

ESPN

#5 – Super Bowl Spreads – The final game of the 2023 NFL season will be played this Sunday with the San Francisco 49ers playing the reigning Super Bowl champion Kansas City Chiefs. 

Over its 50+ year history, the Super Bowl has grown into the biggest US sporting event of the year with over 150 million people watching the game.   Besides the actual football game, the annual event is about parties, food, drinks and commercials.

The time-honored tradition of Super Bowl parties may, however, look slightly different this year.  Inflation over the past few years had dramatically raised the price of food and could alter Super Bowl festivities.  The National Retail Federation (NRF) predicts that Americans will spend $17.3 billion on food, drinks, apparel, and party decorations for Super Bowl LVIII, that’s about a billion dollars more than last year.

It is estimated that about 43% of food served at Super Bowl parties are influenced by supermarket deals.  Datasembly, a marketing company who collects real-time market data, reports that a basket of the 14 favorite Super Bowl foods is up just over +4% this year.  While that doesn’t sound like much of an increase, don’t forget that the 2023 price for the same basket of foods was up nearly 14% over the previous year. The price of a can of soda is up a whopping 57% since 2020.

According to the retail analytics firm 84.51°’s Consumer Digest, the following is what will be served at Super Bowl parties across America on Sunday:  

• 73% serving chips & dips
• 52% serving pizza
• 45% serving alcoholic beverages
• 37% serving fruits and vegetables
• 37% serving premade appetizers

Forbes

Have a great Super Bowl weekend!

Denver & the DSG Team

DSG Advisors
3033 Excelsior Blvd, Suite 530
Minneapolis, MN, 55416
(612) 293-9700
dgilliand@dsgadvisors.com