
Market Quote: Equity Markets Stay Volatile, Real Estate Stocks Waiting on Rate Cuts, Consumer Staples Strive to Spur Profitability
Author: The editor's desk
February 21, 2024
A mid-week analysis of what’s happening in global financial markets from the perspective of AGF’s investment management team.
Topped Out?
Global equity markets continue to be volatile after last week’s surprisingly hot Consumer Price Index (CPI) and Purchaser Price Index (PPI) prints in the United States created more uncertainty about the U.S. Federal Reserve’s interest rate path going forward.
It feels like the market is in a “topping” mode and a pullback should not be ruled out by investors. We are also entering a historical seasonal soft spot in the market, so, again heightened volatility could be in order in the near term.

Cut and Dry
Approximately two-thirds of U.S. Real Estate companies have reported earnings thus far, with nearly half beating Q4 2023 estimates. Guidance for 2024 has been a little less impressive, with the majority of companies guiding below consensus at the midpoint. But these numbers are reflecting delays in rate cuts and disappointing trends in occupancy and rental growth.
All is not lost for the sector, though. While the current high rates remain an impediment to accessing capital for new investments, we do believe that rate cuts are on the horizon, leading to less balance sheet scrutinization. For the near term, we believe investment dollars will be focused on companies with strong balance sheets and healthy industry backdrops.

Back to Basics
For consumer staples companies, key topics of debate coming into this year included the ability to drive topline momentum through pricing against the impact of slowing goods inflation, other rising costs (such as labour) and the potentially weaker consumer environment. With roughly 70% of Consumer Staples companies in the U.S. having reported fourth quarter earnings, these dynamics were clearly in play with just under half of the companies posting a topline miss relative to expectations.
Many of these U.S. companies have responded in kind by striving to spur profitability through supply chain optimizations, inventory management and diversifying into alternative revenue streams such as advertising/membership revenue, resulting in 85% of companies beating on earnings per share (EPS) so far.
Looking forward, we believe some of the same companies are cautious about the consumer environment but are optimistic about their ability to drive topline growth with a more balanced approach: leveraging strong brand equity and consumer value proposition to drive volumes, while employing new technologies such as generative artificial intelligence (AI) to both increase customer engagement as well as optimize operational efficiency.

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The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.
Commentary and data sourced from Bloomberg, Reuters and other news sources unless otherwise noted. The commentaries contained herein are provided as a general source of information based on information available as of February 21, 2024 and are not intended to be comprehensive investment advice applicable to the circumstances of the individual. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Market conditions may change and AGF Investments accepts no responsibility for individual investment decisions arising from the use or reliance on the information contained here.
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