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America’s Honeymoon Is Over

😞 The Honeymoon Period is over in America. Consumers are getting nervous now that economic changes that have been hyped up for four years are getting put in place.

February 10, 2025

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In this issue of the peel:

  • 💼 About as unexciting as yesterday’s Super Bowl was expected to be, January’s jobs report was just as mid as you’d want it to be. 

  • 🚬 My girlfriend’s personal stylist had a record quarter, and spending other people’s money is hitting an all-time high for Affirm. Canopy Growth proves weed can get you low, and someone needs to teach the youth how cool it is to huff Sharpies.

  • 😞 The Honeymoon Period is over in America. Consumers are getting nervous now that economic changes that have been hyped up for four years are getting put in place.

Market Snapshot

Banana Bits

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Macro Monkey Says

We’ll Take It

This was the perfect jobs report to lead us into the Chiefs–Eagles Super Bowl game last night.

No one was excited, the results were fine, and people made a lot of money. Depending on how much of a macro nerd you are, your Super Bowl easily could’ve started Friday morning.

I’m not complaining. I just miss the post-pandemic days when it was always an exhilarating “will they, won’t they” between the economy and absolute societal collapse. Good times, but alas.

Let’s get into it.

The Numbers

According to the Bureau of Labor Statistics (BLS) last Friday, the United States added 143,000 jobs in January. 

That was less than the very nice 169,000 expected by the naughty bunch of economists surveyed by the WSJ, but a Pat-Mahomes-on-a-mediocre-day performance nonetheless. 

Most of the gains came from health care, retail, and social assistance—two of which tend to be heavily subsidized by the federal or state and local governments.

Meanwhile, the dawgs in the mining, quarrying, and oil & gas industries had a weaker month, losing jobs on net.

Despite the weaker-than-expected headline number of additions, the report was especially strong considering the BLS’s revisions over the last two months. See, counting is hard, especially for the government, so sometimes it takes a few tries.

After the beancounters hit the spreadsheets for December and November again, the BLS announced they had undercounted U.S. job growth by a total of 100k for the prior two months. November revisions were up 51k to 307k, and December’s up 49k to 212k.

With those revisions, the unemployment rate declined from 4.1% to 4.0%. Economists were expecting to stay planted at the 4.1% level.

From JPow’s perspective, this is kind of an ideal jobs report. Employment is growing at a healthy rate, but not so fast that wages are popping off and threatening to once again drive increased inflation.

In January, average hourly earnings increased by $0.17 for all employees, or 0.5%. Annually, wages are up an average of 4.1%.

Factoring in December’s PCE inflation, that means real wages grew 0.2% for the month and 1.5% for the year. 

Although the average earnings of Americans aren’t blowing up at the Hawk Tuah girl level that they were in recent years following the pandemic, we’re certainly still well above historical trends.

Even better, Americans took that 0.5% increase in wages and matched that with a 0.1% decrease in the average workweek, down to 34.1hrs (can you f*ckin’ imagine?).

Government jobs were a particularly strong sector for hiring despite all the barking from DOGE, up 32k for the month. To be fair, that is a slight reduction from the 38k monthly average seen throughout 2024.

As a percentage of the total labor force, government roles remain well within historical names, suggesting little evidence to support a frequent narrative that the government is “buying” job growth:

The Takeaway?

The labor market is meeting its resolutions so far in 2025.

Employment is growing at a healthy rate, coming in below expectations but enough to bring down the unemployment rate. It’s business as usual–and we’ll take it.

Because hiring is strong, yet wage growth is not putting upward pressure on prices, this report likely won’t change the Fed’s wait-and-see policy position. As long as buying power and employment are rising while inflation stays docile, we’re chilling.

Career Corner

Question

After attending a virtual info session on Thursday afternoon, when is the best time to send my thank-you email? I know the usual advice is to wait 24-48 hours, but by then, no one is available. Also, just to confirm, applications are open today. Should I apply first or send the thank-you email first?

Answer

Friday morning works. Monday morning is also fine. Always apply first.

Head Mentor, WSO Academy

What's Ripe

Pinterest (PINS) 19.1%

  • My girlfriend’s personal stylist closed 2024 with a record quarter, teaching Zuckerberg a lesson or two in how to grow ad sales. The social media app beat every estimate.

  • Pinterest reported revenue of $1.15bn vs $1.14bn expected. EBITDA of $471mn also beat estimates for $445mn on strong user and revenue-per-user growth.

  • ARPU clocked in at $2.12, above the $2.09 expected—combined with monthly active users of 553mn, well above the 547mn expected, that sent shares soaring.

Affirm (AFRM) 21.8%

  • Giving away free money doesn’t sound like a great business model, but when you charge people half their income for forgetting to pay, then you’ve built yourself a goldmine—especially if most of your customers are American.

  • Luckily, that’s exactly the genius that struck Affirm and led to Friday’s leap over earnings expectations. The buy-now-pay-later firm reported a surprise profit.

  • The company reported EPS of $0.23/sh vs expectations for $0.15/sh. Investors were most excited about the 35% jump in transaction volume, rising to $10.1bn.

  • According to management, consumers are prioritizing flexibility in spending, given elevated uncertainty around rates and inflation. That’s what I do everytime—I don’t know what to expect—just continue spending as much as possible.

What's Rotten

Canopy Growth Corp. (CGC) 27.3%

  • Are these just the worst investments ever? Investors took a hit of pot stocks expecting a decent high, only to find they must be laced with something to take them that low.

  • So much potential, but with disparate regulations and punitively high excise taxes, cannabis companies have struggled to ignite. Especially for Canopy last quarter.

  • The Canadian LP reported $52.34mn in sales, miserably beating estimates despite a 5% YoY decline. Canadian Adult-Use (non-medical) sales fell 10%.

  • The firm’s gross margin fell 4% to 32%. Per-share losses of $0.78/sh were far wider than the $0.34/sh loss expected. Free cash flow expanded by 17%, but only due to lower interest expenses.

Newell Brands (NWL) 26.4%

  • Clearly, no one’s taught Gen Alpha about the magic of huffing Sharpies as the parent company of that and other consumer brands dives on a weak Q4.

  • It was the worst day ever for the makers of Rubbermaid, Contigo, Sharpie, and more. EPS of $0/16/sh beat estimates for $0/14/sh, but the firm’s 6.1% sales decline missed.

  • Newell reported revenue of $1.949bn vs the $1.961bn expected. Forecasting a 5-8% sales decline and losses of $0.06–$0.09/sh in Q1 was effectively the firm’s way of calling for pallbearers. 

Thought Banana

Freak Out Now, Find Out Later

There’s been an awful lot of what experts would call “f*ckin’ around” at the federal since President Trump began Round 2.

I’m not saying that’s necessarily a bad thing—it’s not—I’m simply pointing out that a lot has happened in a short time. Naturally, Americans are worried about finding out.

Let’s dive in.

What Happened?

“Buy the rumor, sell the news” is common wisdom on Wall Street. On Main Street, however, the common wisdom is “freak tf out over every possible headline ever.”

Sounds stressful. If you’re smart like me, you can avoid that stress by simply not knowing how to read. That’s why we stick to the charts.

Speaking of which, according to the charts from the University of Michigan’s preliminary Consumer Sentiment survey for the month of February, overall consumer sentiment declined nearly 5% in the first week of February to 67.8. 

A spike in inflation expectations over the next year was the primary driver, growing from 3.3% in the first month of January to 4.3% in February.

That’s the highest reading of inflation expectations we’ve seen since November 2023.

Like any relationship, after the first time, someone accidentally forgets to flush a number 2 down the toilet, the post-election honeymoon period is over.

Consumer sentiment has still ripped considerably higher compared to the weeks leading up to November’s Presidential election. However, declines in sentiment were present for Democrats, Independents, and Republicans in February.

Tariffs are the primary concern, with a separate survey reported on by the WSJ indicating that consumers expect to cover 50% of any tariff cost that gets passed onto them. If only companies were charitable enough to expect us to cover only half…

The Takeaway?

Human emotion in the face of uncertainty is volatile. Someone call the f*ckin’ Pentagon.

We’re seeing effectively the same thing we see during most post-election periods. We’re all hyped once the new guy gets voted in, followed by nervousness when the changes he's been hyping for four years start becoming a reality.

Gotta love politics. But remember, surveys barely matter—especially preliminary surveys on consumer sentiment immediately following a Presidential inauguration. I’d be more worried if sentiment was spiking–better to be cautious than cocky. 

The Big Question: Are consumers right to be nervous? Could a sense of over-cautiousness cause a potential slowdown? Are Trump’s tariffs real or a negotiating tactic?

Banana Brain Teaser

Previous

Tanks A and B are each in the shape of a right circular cylinder. The interior of Tank A has a height of 10 meters and a circumference of 8 meters, and the interior of Tank B has a height of 8 meters and a circumference of 10 meters. The capacity of Tank A is what percent of the capacity of Tank B?

Answer: 80%

Today

Mark and Ann together were allocated n boxes of cookies to sell for a club project. Mark sold 10 boxes less than n, and Ann sold 2 boxes less than n. If Mark and Ann have each sold at least 1 box of cookies, but together they have sold less than n boxes, what is the value of n?

Send your guesses to [email protected]

❝

Markets have a way of correcting overconfidence.

Larry Summers

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Happy Investing,
David, Vyom, Ankit & Patrick