🇬🇧 Throwback to 2008

What’s going on here?

Almost one-fifth of listed British firms warned investors that last year’s profit would come in smaller than forecast – more than the financial crisis year of 2008.

What does this mean?

Business leaders have years of experience under their belts, along with a subscription to every financial terminal in the world and, most likely, a high-caliber MBA degree. So you’d think that when last year kicked off with raging inflation, cash-strapped shoppers, and languishing economies, they’d have set investors’ expectations low. Like, on-the-floor low. But clearly not: roughly 300 businesses fell short of their projections during the year. They pinned the blame on the high price of borrowing cash, scared-to-spend shoppers, and companies dragging their feet when making deals – in other words, predictable effects of an economic slowdown.

Why should I care?

For markets: Investing is a long-haul flight.

That said, a company falling behind target is already old news, since investors will have baked their expectations into stock prices ahead of time. So besides taking note of any factors that could stick around for years, investors will likely shrug off the results. Just look at Ryanair. The no-frills airline reported worse-than-expected profit for the last quarter and pushed its outlook for this year’s profit down by 5%. The reasons were hardly shocking: fuel was more expensive and the airline was booted from online booking sites. Investors only sent the stock down a little, though, with most staying firm on Ryanair’s future prospects.

Zooming out: Oh, Blighty.

British companies’ problems do seem to be running deep, mind you: the number of job openings in the UK fell nearly 7% in December from November according to online employment agency Adzuna. That means that fewer firms are hiring or that more folk are job-hunting – both signs of a deteriorating job market. Either way, that’s not a reassuring sign for an economy that’s been whacked with inflation-fighting interest rates.

What’s going on here?

China’s drab economy might not be much to look at, but the country’s glimmering luxury market proved that it can still grab shoppers’ attention.

What does this mean?

China’s everyday shoppers haven’t been biting, even as retailers continue to pull their prices lower. After all, the wobbling housing market has undermined confidence in their single biggest asset. International trade partners have been more cautious with their cash, too, bringing in less money than China’s export industry made the year before last. But one group is still spending big: the country’s personal luxury market made 12% more money last year than the one before, according to Bain & Company. That’s partly because the well-to-do haven’t been jetting off to Paris, London, and New York as much, so they’re stocking up on thousand-dollar neckerchiefs and cashmere socks within China’s borders instead.

Why should I care?

For markets: Luxe is living.

LVMH reported that sales in China were 30% higher in December than the same time the year before. Not just that, but the French luxury firm told investors that there are now twice as many Chinese shoppers with a penchant for the finer things than there were in 2019. That’s a lot of pent-up demand waiting to be released, and it could line LVMH and other high-end peers’ pockets.

The bigger picture: Thrift shopping is coming back.

Investors clearly don’t have the desire to go bargain hunting right now, leaving Chinese stocks on the floor instead of snapping them up for less. But that might change now that there’s proof of a pocket of spending, which could signal the start of a slow recovery. Case in point: LVMH’s newest results have already lifted the shares of other luxury firms higher. And with major US firms like Nike and Estée Lauder reporting results in the coming weeks, there could be more pick-me-ups to come.