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Miami Herald
02-06-2025
- Business
- Miami Herald
Jamie Dimon flags critical risk to US economy
There is growing debate over whether the U.S. economy is on its way to a reckoning. Some worry that sticky inflation due to newly instituted tariffs will cause households and companies to retrench, sending the economy into stagflation, or worse, recession. Others worry that America's seemingly insatiable appetite for spending has us on an unsustainable path. Eventually, investors will stop buying our debt, causing interest rates and our deficit to swell even more. Related: JPMorgan updates Fed interest rate cut outlook Among those sending warning messages are some of the most influential capitalists of our time, including Ray Dalio, Stanley Druckenmiller, and Paul Tudor Jones. Each is a legendary hedge fund manager with over forty years of experience navigating markets and the economy, and all three have said they're concerned with the growing U.S. debt pile. They're far from the only ones raising a red flag over the risks. JP Morgan's influential CEO Jamie Dimon has joined the chorus, raising the specter of another potentially underappreciated risk to our economy. Bloomberg/Getty Images In 2020, the Fed and Congress unleashed a torrent of monetary and fiscal support to keep America from falling into a COVID-driven depression. Zero-interest rate policy, or ZIRP, and multiple stimulus payments worked, accelerating GDP sharply out of its steep downturn. However, the spending tsunami also unleashed inflation, which rocketed up to 8% in 2022. Related: Housing market chief Pulte sends blunt message on Fed interest rate cuts Soaring inflation surprised the Fed, given that Fed Chair Powell infamously called it transitory. Eventually, he was forced to embrace the most hawkish pace of Fed interest rate hikes since the 1980s to get inflation under control. Powell's war on inflation successfully wrestled inflation back below 3%. However, progress has slowed and higher rates have taken a bite out of the jobs market, given that unemployment has edged up to 4.2% from 3.4% in 2023. The Fed switched gears again to shore up the jobs market, cutting interest rates last September, November, and December. However, those cuts have yet to boost employment, and the Fed has shifted to the sidelines on additional cuts this year amid growing concern that new tariffs may reignite inflation in the second half of 2025. This dynamic has lodged the Fed firmly between a rock and a hard place. It cannot raise rates without risking recession if inflation rises, or cut rates without risking inflation if unemployment continues climbing. The situation has drawn fierce criticism from President Donald Trump, who referred to Powell as Mr. Too Late last month, arguing rates should be cut now, not later. Others in the administration, including Treasury Secretary Scott Bessent and FHFA housing chief Bill Pulte, have similarly argued for rate relief. The economic uncertainty has caused Treasury Bond yields to increase this year, despite the Fed's cuts late last year. For example, the 10-year Treasury Note yield has risen to nearly 4.5% from below 3.7% last September. The rising yields are good news for those pocketing higher yields from money market accounts or Treasury bond portfolios. But they're downright bad news for just about everyone else, especially those with credit card debt or would-be homebuyers shopping for a mortgage. Related: Jamie Dimon sends terse message on stocks, economy The uncertainty associated with the economy has also started to impact household and business spending decisions. Consumers are shifting spending to essentials and pausing discretionary purchases. Meanwhile, businesses are rethinking expansion plans while they await trade negotiation outcomes. The dynamic may worsen if bond markets get unhinged. In good times, companies (and the rest of us) pay a smaller percentage spread to Treasury yields to borrow, keeping our costs low. In bad times, the spread widens, increasing costs, sometimes to a point where it forces tough decisions, like forgoing a purchase or business investment. A widening of credit spreads appears to be firmly on Jamie Dimon's mind. His role at the largest U.S. and fifth-largest global banks by assets gives him unprecedented insight into what's keeping business leaders awake at night. "If people decide that the U.S. dollar isn't the place to be, you could see credit spreads gap out; that would be quite a problem," said Dimon in an interview with Fox Business. A "gap out" would mean a widening in the interest borrowers pay above Treasuries. The implications of wider spreads would be far-reaching, especially if spreads widen as Treasury yields rise because buyers are wary. "It hurts the people raising money. That includes small businesses, that includes loans to small businesses, includes high yield debt, includes leveraged lending, includes real estate loans. That's why you should worry about volatility in the bond market," said Dimon. Dimon didn't set a clock to when such a widening may happen, but his range of possibilities includes later this year. "It's a big deal, you know it is a real problem," said Dimon. "I don't know if it's six months or six years." The federal government's budget deficit is running at roughly $2 trillion annually. Dimon has a simple solution to reduce the risk that a loss of confidence will have ripple effects throughout the government and corporate bond market: Grow the economy. "The real focus should be growth, pro-business, proper deregulation, permitting reform, getting rid of blue tape, getting skills in schools, get that growth going – that's the best way," said Dimon. Related: Veteran fund manager who predicted April rally updates S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Economic Times
23-05-2025
- Business
- Economic Times
India in a mature bull market, still poised for positive returns: Pankaj Murarka
While our exposure is currently limited, we believe some of these platforms could emerge as the next generation of large-scale consumer companies. "Over the past five years, many of the low-hanging fruits have already been harvested. Significant money has been made, and valuations are now expensive. In fact, India is currently the most expensive market globally," says Pankaj Murarka, CIO, Renaissance Investment. Firstly, help us understand your outlook. What are you really pencilling in for the markets? Lately, a lot has been happening globally—we're in the midst of tariff uncertainty and its potential implications on businesses. However, back home, some macro indicators seem to be faring well. What's your sense of the Indian markets, and where do you see us heading from here? Pankaj Murarka: I've consistently maintained that we are in a bull market. My simple definition of a bull market, drawn from the original Dow Theory, is that markets deliver positive returns on a full-year basis. I still firmly believe markets will yield positive returns on an annualised basis. That said, I've also been highlighting that this is a mature bull market—we're now in the sixth year since it began, right around the onset of the COVID-driven lockdowns. Over the past five years, many of the low-hanging fruits have already been harvested. Significant money has been made, and valuations are now expensive. In fact, India is currently the most expensive market globally. We must also acknowledge that we're experiencing a cyclical slowdown—partly due to domestic factors and partly due to global trade headwinds. Yet, India is arguably the best-placed market in the world today. I still believe earnings growth will recover starting this year, with Nifty potentially delivering low double-digit earnings growth, and markets generating similar returns. So yes, our view on markets remains constructive. However, investors will need to be selective—picking the right sectors and stocks is crucial. At the index level, returns are likely to be in the high single digits to low double digits, which is still quite healthy for a mature bull market at this stage of the cycle. What are you doing with your internet stocks? Pankaj Murarka: To be honest, we've booked some profits. What began as a highly contrarian, fear-driven trade has now turned euphoric. Valuations in some of the companies we liked are now pricing in growth too far into the future. The key with internet stocks is the ability to identify strategic winners over the next 5–10 years. In my view, the top two or three players in any segment will generate 130–140% of the industry's profits—implying the rest will lose money. So, picking the right winner, and at the right valuation, is critical. For example, take Zomato in the food delivery space. At ₹50, we saw significant profit potential and felt the stock was mispriced. Today, it appears to be pricing in too much future growth. While Zomato remains a category leader and should do well over the medium term, I don't expect much near-term upside in its stock price over the next 12–18 months. Since we manage clients' money, our investment horizon is 2–3 years. Strategically, I remain very positive on the internet space, but yes, we have partially exited some positions. Assuming that earnings growth will be good—but not extraordinary—and that finding companies growing even at 15% might be tough, how would you build a portfolio for the next three years? Specifically, one comprising companies with 15–20% top-line and 15–25% bottom-line growth, but whose valuations aren't overly stretched. Pankaj Murarka: Absolutely. You've hit the nail on the head. While aggregate earnings growth is likely to remain in the low double digits, there are pockets across sectors where growth is stronger. The key is to find reasonably valued companies within those areas. Take EMS (electronics manufacturing services) companies—they're growing fast, but are already priced to perfection. Instead, I prefer slightly lower growth—mid to high teens—if valuations are more reasonable. What matters to investors is actual returns, and you can achieve strong returns even with moderate earnings growth if you enter at the right it comes down to business models and management execution. Companies with strong execution at a strategic level can deliver outlier growth despite headwinds. To answer your question, there are three broad buckets we like:First, large banks. We own the top four private sector banks in India. These stocks are trading at a discount to the Nifty and offer reasonable valuations. They are capable of delivering mid- to high-teens CAGR returns over the next three years. So, this remains a core portfolio consumer and consumer-oriented stocks. Over the last six months, we've pivoted towards this space. These stocks underperformed over the past five years, but valuations are now back in line with long-term averages. With a likely revival in consumption, we're focusing on companies driving both organic and inorganic growth—those with strategies to outperform industry internet companies. Despite some profit-taking, we still hold names in this space. Select internet companies can grow 25–30% CAGR over the next 5–7 years and are reasonably valued. So, they remain part of our portfolio. In summary, these three buckets should help generate high-teens portfolio-level returns—an excellent outcome in a market cycle like this, with moderate risk. Now that you've sketched the broader picture, let's fill in the details. Within those three buckets, what are your top holdings or ideas? Pankaj Murarka: Starting with large banks, we own HDFC Bank—we've re-entered after a gap of three years. Post-merger, the bank had a period of consolidation and was underperforming industry growth. Now, we expect it to regain industry-leading growth within the next four quarters. We also own Kotak Mahindra Bank, and ICICI Bank remains a core holding given its strong execution. In the consumer segment, we have exposure across staples and discretionary. Among staples, we own Tata Consumer and Godrej Consumer. These companies are expanding into new categories and making strong organic and inorganic investments to drive growth. For context, India's private final consumption expenditure (PFCE) is $2.6 trillion, higher than the GDP of the 10th largest economy, and growing at 10–12% annually. Companies with strong strategies and execution can capture a larger share of this consumer discretionary, we own Jubilant FoodWorks. We believe pizza, as an organised category in India, remains underpenetrated with a long runway for growth. We also hold names in consumer durables, where penetration is still low. Companies that can execute well on the ground have the potential to deliver strong mid- to high-teens growth. In the internet space, we continue to hold Paytm and Info Edge. We have a smaller holding in Zomato, having booked some profits. We are also evaluating new-age internet and consumer tech companies like Nykaa and FirstCry. While our exposure is currently limited, we believe some of these platforms could emerge as the next generation of large-scale consumer companies.
Time of India
23-05-2025
- Business
- Time of India
India in a mature bull market, still poised for positive returns: Pankaj Murarka
"Over the past five years, many of the low-hanging fruits have already been harvested. Significant money has been made, and valuations are now expensive. In fact, India is currently the most expensive market globally," says Pankaj Murarka , CIO, Renaissance Investment . Firstly, help us understand your outlook. What are you really pencilling in for the markets? Lately, a lot has been happening globally—we're in the midst of tariff uncertainty and its potential implications on businesses. However, back home, some macro indicators seem to be faring well. What's your sense of the Indian markets, and where do you see us heading from here? Pankaj Murarka: I've consistently maintained that we are in a bull market. My simple definition of a bull market, drawn from the original Dow Theory, is that markets deliver positive returns on a full-year basis. I still firmly believe markets will yield positive returns on an annualised basis. That said, I've also been highlighting that this is a mature bull market—we're now in the sixth year since it began, right around the onset of the COVID-driven lockdowns. Over the past five years, many of the low-hanging fruits have already been harvested. Significant money has been made, and valuations are now expensive. In fact, India is currently the most expensive market globally. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like War Thunder - Register now for free and play against over 75 Million real Players War Thunder Play Now Undo We must also acknowledge that we're experiencing a cyclical slowdown—partly due to domestic factors and partly due to global trade headwinds. Yet, India is arguably the best-placed market in the world today. I still believe earnings growth will recover starting this year, with Nifty potentially delivering low double-digit earnings growth, and markets generating similar returns. So yes, our view on markets remains constructive. However, investors will need to be selective—picking the right sectors and stocks is crucial. At the index level, returns are likely to be in the high single digits to low double digits, which is still quite healthy for a mature bull market at this stage of the cycle. What are you doing with your internet stocks? Pankaj Murarka: To be honest, we've booked some profits. What began as a highly contrarian, fear-driven trade has now turned euphoric. Valuations in some of the companies we liked are now pricing in growth too far into the future. The key with internet stocks is the ability to identify strategic winners over the next 5–10 years. In my view, the top two or three players in any segment will generate 130–140% of the industry's profits—implying the rest will lose money. So, picking the right winner, and at the right valuation, is critical. For example, take Zomato in the food delivery space. At ₹50, we saw significant profit potential and felt the stock was mispriced. Today, it appears to be pricing in too much future growth. While Zomato remains a category leader and should do well over the medium term, I don't expect much near-term upside in its stock price over the next 12–18 months. Since we manage clients' money, our investment horizon is 2–3 years. Strategically, I remain very positive on the internet space, but yes, we have partially exited some positions. Live Events Assuming that earnings growth will be good—but not extraordinary—and that finding companies growing even at 15% might be tough, how would you build a portfolio for the next three years? Specifically, one comprising companies with 15–20% top-line and 15–25% bottom-line growth, but whose valuations aren't overly stretched. Pankaj Murarka: Absolutely. You've hit the nail on the head. While aggregate earnings growth is likely to remain in the low double digits, there are pockets across sectors where growth is stronger. The key is to find reasonably valued companies within those areas. Take EMS (electronics manufacturing services) companies—they're growing fast, but are already priced to perfection. Instead, I prefer slightly lower growth—mid to high teens—if valuations are more reasonable. What matters to investors is actual returns, and you can achieve strong returns even with moderate earnings growth if you enter at the right price. Ultimately, it comes down to business models and management execution. Companies with strong execution at a strategic level can deliver outlier growth despite headwinds. To answer your question, there are three broad buckets we like: First, large banks. We own the top four private sector banks in India. These stocks are trading at a discount to the Nifty and offer reasonable valuations. They are capable of delivering mid- to high-teens CAGR returns over the next three years. So, this remains a core portfolio segment. Second, consumer and consumer-oriented stocks. Over the last six months, we've pivoted towards this space. These stocks underperformed over the past five years, but valuations are now back in line with long-term averages. With a likely revival in consumption, we're focusing on companies driving both organic and inorganic growth—those with strategies to outperform industry averages. Third, internet companies. Despite some profit-taking, we still hold names in this space. Select internet companies can grow 25–30% CAGR over the next 5–7 years and are reasonably valued. So, they remain part of our portfolio. In summary, these three buckets should help generate high-teens portfolio-level returns—an excellent outcome in a market cycle like this, with moderate risk. Now that you've sketched the broader picture, let's fill in the details. Within those three buckets, what are your top holdings or ideas? Pankaj Murarka: Starting with large banks, we own HDFC Bank—we've re-entered after a gap of three years. Post-merger, the bank had a period of consolidation and was underperforming industry growth. Now, we expect it to regain industry-leading growth within the next four quarters. We also own Kotak Mahindra Bank , and ICICI Bank remains a core holding given its strong execution. In the consumer segment, we have exposure across staples and discretionary. Among staples, we own Tata Consumer and Godrej Consumer. These companies are expanding into new categories and making strong organic and inorganic investments to drive growth. For context, India's private final consumption expenditure (PFCE) is $2.6 trillion, higher than the GDP of the 10th largest economy, and growing at 10–12% annually. Companies with strong strategies and execution can capture a larger share of this growth. In consumer discretionary, we own Jubilant FoodWorks. We believe pizza, as an organised category in India, remains underpenetrated with a long runway for growth. We also hold names in consumer durables, where penetration is still low. Companies that can execute well on the ground have the potential to deliver strong mid- to high-teens growth. In the internet space, we continue to hold Paytm and Info Edge. We have a smaller holding in Zomato, having booked some profits. We are also evaluating new-age internet and consumer tech companies like Nykaa and FirstCry. While our exposure is currently limited, we believe some of these platforms could emerge as the next generation of large-scale consumer companies.
Business Insider
21-04-2025
- Business
- Business Insider
The Pepperoni Price Index
Are you craving a frozen pizza lately? You're not alone. Maybe it's because the weather's warmer, maybe you're jonesing for a lazy-day treat, or maybe it's because the stock market's down and tariffs are throwing everything into chaos. The uncertainty in the economy has people on the hunt for recession indicators — not just potential labor market weakness or spending pullbacks, but also more specific signals that suggest dark times are nigh. Consumers on edge, for example, buy more lipstick as a still-affordable luxury, or they start to scoop up smaller bottles of liquor. Another peculiar sign they're feeling pinched by the economy: They buy more frozen pizza, specifically, the fancy kind. "This happens every sort of downturn in the economy — there's increased demand for premium frozen pizzas, high-priced frozen pizzas," said Craig Zawada, the chief visionary officer at Pros Holdings, a price optimization company. It's a bit counterintuitive, he added, since you'd think consumers are more cost-conscious, but it's actually a trade that makes sense because "they're replacing eating out to having a good frozen pizza at home." So next time you find yourself lingering in the frozen section, know that your hankering for DiGiorno might be due to a case of economic anxiety. When people are feeling pinched — economically, existentially — they turn to the grocery store frozen section. In 2009, in the midst of the Great Recession, frozen food sales grew by 3.1%. When the pandemic hit, frozen pizza sales spiked by nearly $1 billion from the year before, from $5.8 billion in revenue in 2019 to $6.6 billion in revenue in 2020, per the market research firm IBISWorld. "Frozen pizza has always been a good category," Alexander Chafetz, an investment banker who does dealmaking in the consumer space, said. "But it came into focus, I would say, during the pandemic, when people weren't working, money was tight, and you had to feed a family at night. Frozen pizza is a very economical way to feed your family." Michael Ryan, the owner of Tree Tavern Pizza, a frozen pizza company that operates out of New Jersey, told me that during the pandemic, his sales "went through the roof." He said that pizza as a category does well during downturns, but frozen has the extra "convenience" factor. "It is in the freezer, ready to heat. No tipping the delivery person or cold, soggy pizza," he said. Right now, with everything that's going on in the country and in the world, people are very nervous, so we're going to gravitate toward more comfort foods. Although growth has since slowed from the breakneck COVID-driven pace, people are still buying up more frozen pizzas, thanks in large part to inflation. The US frozen pizza industry generated $6.5 billion in annual revenue in 2024, per IBISWorld, and remains well above its pre-pandemic level. Tighter budgets still make that $10 frozen pie seem pretty appealing. While there's a growing amount of competition in the frozen food aisle at the grocery store, frozen pizza is still a star player, said Phil Lempert, a food industry analyst and the editor of The boxes take up a lot of space, and they're relatively attractive to display. They're also convenient for stores to offer promotions and discounts on "because of the amount of different pizza brands that are out there, I would say that every week when I look at store circulars, there's at least one pizza on sale," Lempert said. "These companies are always vying to give promotions to the retailer." Pizza is a comfort food that people tend to crave in trying times such as these. "Right now, with everything that's going on in the country and in the world, people are very nervous, so we're going to gravitate toward more comfort foods, whether it's mac and cheese, whether it's hot dogs, whether it's pizza," Lempert said. Mid-conversation, I realized I might be doing some accidental coping via comfort food lately, as I've made pizza (homemade, which was terrible) and mac and cheese (luckily, from the box) in the past few weeks, neither of which are in my normal rotation. It also probably helps frozen pizza's case that the quality has improved dramatically in recent years, and there are a lot more varieties on offer. You've got healthier options, with cauliflower crusts, for example, or you can indulge (slightly) with premium ingredients like hot honey, prosciutto, or basil. Restaurant brands have launched their own frozen offerings so people can get something that tastes like the out-to-eat experience at home. Ryan pointed out that home freezers have also gotten bigger, which makes it easier to stock up. Now, as that good old economic anxiety is stirring up once again, people are leaning toward eating at home and stocking up from the grocery store frozen aisle. David Portalatin, a senior vice president and food industry advisor at Circana, a market research firm, said that over the past year or so, consumers have been opting to buy a greater share of their meals at retail establishments — meaning grocery stores, clubs, online — than from food-service operations, such as restaurants. "That's just a reflection of several things," he said. "One is a little bit of response to inflation and the fact that food inflation away from home is still accelerating faster than at home. But it's also this sort of longer-term trend of a more home-centric consumer." When the pandemic took hold, many people had to stay home. Once the pandemic subsided, they were excited to get back out there and go to the restaurants they had eschewed for months. But that stay-at-home muscle is still stronger than it was pre-pandemic. More people are working from home, where it's easy to whip something up in their own kitchens — Ryan said that while it may seem silly, "the fact that many folks never got out of their pajamas helped spur sales." Consumers have also grown more accustomed to having fun nights in — turns out all that practice in 2020 means they've gotten better at at-home entertainment. Consumers become more price sensitive as they opt for cheaper, family-size offerings, like pizza. "People seem to be more comfortable at home. They want to do their own drinking at home," Chafetz said. "People are happy being at home, nesting. I think people nest when they're nervous, and so I think there's a lot of that going on also." "Empirical evidence suggests consumers often 'trade down' to frozen or delivered pizza during recessions. Consumers become more price sensitive as they opt for cheaper, family-size offerings, like pizza," Alex Fasciano, an analyst at CFRA Research, said in an email. He noted that pizza restaurants' marketing is anchored around value, too, such as Domino's recently launched appeal to more budget-conscious consumers: the "Emergency Pizza" promotion (a free pizza) and "Best Deal Ever" promotion (a $9.99 deal). But again, it's not necessarily just any old traded-down item people are buying as they start to worry about where the economy is headed, frozen pizza or otherwise; it's the nicer stuff. It's reflective of this overarching attitude among American consumers that we still want to treat ourselves, even as we cut back in other areas. Many people buckle down on their budgets somewhat, but they also spring for treats, whether it be a fancy latte, a weekend getaway, or a frozen pizza they tell themselves is healthy, which, maybe, don't look too too hard at the ingredients. "In general, over the last year, we've seen the headwind at restaurants and the tailwind at making meals at home because they're more affordable. Yet there are all kinds of examples where we will choose the more premium offerings," Portalatin said. "When we go to retail, we may not be choosing the lowest price point offering, recognizing that we're already saving money by cooking at home." Consumers have been battening down the hatches for a while now. Heightened concerns around tariffs have led to an acute sense of dread among many Americans about prices, economic stability, and even the safety of their own jobs. It's the type of mix that might make that stay-at-home Red Baron extra enticing. William Curtis, a senior research analyst at IBISWorld, said they're not forecasting an economic-freak-out-induced spike in frozen pizza sales like the ones in 2009 or 2020, in part because it's not clear what will happen in the overall economy. But in the event that things really start to go south, "the logic of buying the frozen pizza when you have less money would still hold," he said. Curtis added that frozen pizza is facing more competition for consumer dollars than it did 15 years ago, with more frozen options available, not to mention the proliferation of delivery services that make it possible to get all kinds of foods dropped off right to your door. Obviously, cooking at home is still cheaper, especially when you account for all the fees and the tip, but many consumers are still doing some slight splurging. "There are a lot of consumers that are willing to pay these fees just for the convenience of delivery," he said. Ryan, from Tree Tavern, said he's not really concerned about competition from delivery or restaurants, because he sees frozen as its own thing. His customers are loyal, and he's focused on quality and authenticity that he hopes will appeal to people in good times and bad. He only sells plain cheese pizza, which helps keep the price stable and gives customers the opportunity to dress the pizza up however they like. "I kid with people who ask me why I don't offer more toppings," he said. "I jokingly say, 'Buy your own damn pepperoni!'" If the economy takes a turn for the worse, customers may stick with just the cheese.
