SFM Observer - May 2024

Glenn Sweeney |

Issued: June 5, 2024

The Dow closed the month of May at 38,686 for a monthly gain of 870 points or 2.3%.  The Fed and future interest rate policy has everyone on Wall Street guessing what will happen this year, if anything.  In Europe, there is more clarity on interest rate policy and there is likely to be a rate cut by the ECB (European Central Bank) soon.  Inflation is coming down faster in Europe.  Stocks related to artificial intelligence are powering the market and some other traditional industry sectors are starting to trend higher.

Some interesting events from the month just past:

•               The office building market is going through a painful restructuring this year and it is likely to continue for some time.  Old bank loans at low rates are coming due and the rate to renew the loan can be double the old rate.  Combine that with the fact that Covid emptied out many buildings and employees don’t want to go back to commuting and you have a bad scenario if you own an office building.  Tenants are now in command and demand discounts and upgrades in order to stay in their lease. Unfortunately, many of the office building loans in distress were made by our local banks and they are going to end up owning some of these buildings either through foreclosure or negotiation with the landlord.

•               BAE Systems, a major employer here in NH, is forecasting strong growth this year as the wars around the world continue.  BAE makes combat vehicles, ammunitions, missile launchers and here in NH they make electronics and night vision equipment.  BAE is headquartered in the United Kingdom.  The war in Ukraine is the main driver of their recent growth and other NATO nations are getting serious about their defense capabilities.

•               Walmart is experiencing an increase in the sale of groceries as consumers are looking for ways to decrease the amount of money spent on food.  Grocery inflation has been terrible as everyone knows and Walmart has done a better job of managing price increases.  They also reported that higher income shoppers in the $100,000 plus income bracket have started shopping more at Walmart.

•               Red Lobster, the restaurant chain, has filed for bankruptcy.  The firm has not been able to cope with the rising costs of seafood, labor and a drop off in visitors.  Red Lobster has restaurants in 44 states and had all you can eat specials that many people are familiar with.

•               The Stellantis CEO said that Jeep will soon offer a full electric vehicle for $25,000.  Other manufacturers have said the cost of the components (especially the battery) make this very difficult to achieve.  Stellantis owns car brands in Europe where they already produce a small electric car in this price range.  We will see if he can deliver on this goal.

Thank you for reading this issue of the SFM OBSERVER. 

Until next month,

Glenn Sweeney CFA