As Robespierre discovered in the summer of 1794, it’s hard to hide your head while others abduct him. After seven weeks of gruesome silence, the stock market was bustling when we stumbled upon Memorial Day. All major indices rose more than six percent in a week to break consecutive losses. Both the S&P 500 and the Dow Jones Industrial Average had their best week since November 2020.
Better-than-expected results from Dollar Tree, Ross Stores, and Costco seem to indicate that consumers are not running away, despite the extremely miserable situation of investors. The earnings were so good that they surpassed all memories of last week’s misfortune caused by companies like Walmart and Target. Walmart, which has come under fire lately, caught the eye of investors, up 8.2 percent, as did Target, with a seven percent week-on-week gain.
While we don’t want to spoil this period of good sentiment, we are compelled to point out that it’s very similar to what Wall Street calls a “bear market rally.” Even after rising this week, Walmart shares are down 29.29% in May. Oddly enough, the target ingredients drop by exactly the same amount. Costco shares are up about 12% this week, but are down 16.2% in a month. Ross Stores shares are up 20.8% this week and are still down 16.9% in May. Dollar Tree shares rose 28.4% this week but failed to enter positive territory for the month.
Rising stocks can have some undesirable consequences. As we have stated several times, the decline in the value of shares affects the restraint of financial conditions. It helps and relieves the Federal Reserve’s campaign against inflation. The rise we have seen in the stock market this week is doing the opposite. Financial conditions are easing and require more practical restraints from central banks. “You can’t fight the Fed” is an old Wall Street axiom, and this week’s rally is definitely against the Fed.
The newfound belief in consumer power combines oddly with falling consumer sentiment numbers. On Friday, the University of Michigan reported that consumer sentiment fell further in the second half of May. Wall Street has convinced itself it’s already down as it hits a decade low in the middle of the month. As we warned on Thursday, this view does not take into account the impact on consumer sentiment of the new two-week record-breaking fuel prices. Oil prices are likely to rise further this summer as demand rises with increased summer travel, which will further weaken consumer sentiment by driving up fuel prices.
Silver Lake Co-CEO Egon Durban attended PBR Unleash The Beast held at Madison Square Garden in New York on January 7, 2022. (Cindy Ord/Getty Images)
Twitter investors voted against the re-election of Silver Lake co-CEO Egon Durban to the company’s board at this week’s shareholder meeting. Durban was criticized by shareholder advisors Corporate Shareholder Services and Glass Lewis for joining too many corporate boards, and shareholders agreed on Twitter. But it looks like Durban won’t leave the board. In its regulatory filing, Twitter said that Durban has not yet disappeared. The company said it promised to sit on up to five company boards by May next year.
“The Board, Mr. Durban, who is a very influential member and believes he brings to the board unparalleled industry operational knowledge, unparalleled perspective and invaluable M&A skills and experience,” said Durban.
Just as Twitter believes it knows better than its users who they can follow safely and whose opinions they can trust, so the board believes it knows better than its shareholders who should represent them in the boardroom.
Source: Breitbart
