Investment Q&A

Retail sales in the US are slowing, but are not overly troublesome yet. The larger names we feel will have less sensitivity to economic shocks or changes in retail sales. Of the list, we feel that AMZN and BKNG have less sensitivity, particularly AMZN as it has many other avenues of growth (AWS, AI, etc.). CROX and SHOP are subject to shifts in retail sales, however, so far these names have held up well for revenue growth. If we are to see sustained downward momentum in economic activity, we feel CROX and SHOP are most at risk. But any downward price pressure can easily be reversed as tight financial conditions quickly turn into loose financial conditions. 

We feel that as rates stay elevated, the risk of economic contraction increases, leading to potential economic shocks by mid-2024. If the narrative shifts that inflation is normalizing and thus high rates are less needed, bond yields can decline leading to easing financial constraints, and thus the risk of economic contraction is reduced. We believe much depends on the expectations for inflation and rates over the next 6-12 months.