June 27 – July 1 | Nike, GDP and travel: will the markets take off this week?

Despite the summer climate, the markets are still facing headwinds and storm clouds. Indeed, stocks are battling through high volatility against a backdrop of economic and geopolitical uncertainties. And there could be more trouble ahead. The month of July isn’t historically conducive to growth as trading volumes decrease through the holidays. That’s why it’s always a good idea to diversify your portfolio, so you can weather the storm and focus on the long-term!

A reminder that the Czech Republic will take over the presidency of the European Union from France on July 1st. The country, led by Miloš Zeman, has a strong agenda to reduce Europe’s reliance on Russian energy.

This week, we’ll also take a look at corporate earnings from Nike, US GDP forecasts and the outlook for the tourism industry.

Nike’s quarterly results: can they fix the supply chain?

Nike will present its figures for the fourth fiscal quarter on Monday, June 27. Analysts expect Nike to post earnings of $0.81 per share, down 12.9% year-on-year. Net sales are expected to hover around $12.18 billion, down 1.37% from the previous year.

Is this potential drop worrying? Not necessarily, and for two reasons:

  • The decrease is mainly caused by blockages on the supply chain which should be resolved as soon as the next quarter. Nike has reorganised the entire supply chain to improve efficiency, including new distribution centres, as well as setting up a “sole train” that transports goods to the United States.
  • The company’s outlook remains promising. In fact, Nike is diving into the metaverse to attract new consumers through immersive experiences. In November 2021, the company revealed its plans for Nikeland: an online universe where 7 million people were able to discover new Nike products, make their own sneakers, or even play online games. This new market could be very lucrative for Nike! Curious to know more about the metaverse? Read more here.

A summer boom for tourism stocks?

The tourism industry is enjoying its best summer season in years. In France alone, visitor numbers are now well above pre-covid levels, even in regions that are usually less popular.

We’re seeing the same trend in the United States, and financial analyst David Moadel has highlighted the travel sector as one that could outperform. Despite high fuel prices, which will impact transportation costs, millions of Americans are getting ready to travel on the first weekend of July to celebrate the national Independence Day holiday. With this in mind, keep your eye on travel stocks like Airbnb and Booking, as well as airlines such as Delta and American Airlines.
Moadel adds that oil-related stocks could also be popular: more travellers = more energy needed for transport! In particular, the analyst highlights Occidental Petroleum which he believes has a strong P/E (price-to-earnings) ratio.

US economy slows down

On Wednesday, June 29, the United States will publish its GDP figures for the first quarter. These figures measure the overall wealth created by the US, so it’s a good measure of the American economy. What can we expect?

  • The US economy is likely to contract by 1.5% at an annualised quarterly rate during the first three months of 2022. This decline is stronger than expected.
  • Imports are likely to increase (18.3% against 17.7% in the preliminary estimate), boosted by non-food and non-automotive consumer goods. Exports are expected to fall slightly (-5.4% against -5.9 %).
  • Consumer spending is expected to increase (3.1% vs. 2.7% in the prior estimate), driven by housing and utilities, as well as motor vehicles and parts, while spending on gasoline and other energy goods will decline.

With this in mind, keep an eye out for US ETFs that track the growth of American companies in the utilities sector like the US Utilities Sector ETF (SPDR).

Economic and earnings calendar

Monday – Unemployment figures in France (May). Quarterly results from Nike.

Tuesday – Consumer confidence in France (June).

Wednesday – Consumer Confidence in the Netherlands (June). Inflation rates in Spain and Germany (June). Economic sentiment index in the euro zone (June). GDP growth in the United States (first quarter). Quarterly results from General Mills, Trigano.

Thursday Weekly US unemployment numbers. Inflation rate in France (June). Unemployment rate in Germany, Ireland and the euro zone (May). Micron quarterly results.

Friday – Fiscal balance in France (May). Unemployment rate in Austria (June). PMI manufacturing index in Italy, France, Germany and euro zone (June). Inflation rate in the euro zone and in Italy (June). Sodexo quarterly results.

We’ll be back next week with another edition of the BUX Breakdown. In the meantime, have a great week on the markets!

This BUX Breakdown was written by Clémentine Pougnet.

All views, opinions, and analyses in this article should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.