📈 American retailers aren't here to play

US opens up shop | Aluminum: the sexiest of metals |

Hi Reader, here's what you need to know for July 19th in 3:11 minutes.

🗞 The US catches all the headlines, but make sure you don’t forget about emerging markets. The likes of Brazil, India, and Turkey have a lot to offer, and you can find out how to make the most of them in Tuesday’s The Hidden Potential Of Emerging Markets event. Get your ticket here

Today's big stories

  1. Aluminum miner Alcoa’s earnings confirmed what investors already knew: the global economy’s in a strong position
  2. There are four ways you can profit if you're convinced the housing market's on the verge of collapse – Read Now
  3. US retail sales for June came in ahead of expectations, suggesting the country’s running hot

Alcoa-holics

Alcoa-holics

What’s Going On Here?

Alcoa – America’s largest aluminum producer – reported its highest-ever quarterly profit late last week, with the world unable to get enough of the intoxicating metal.

What Does This Mean?

Yep, we’re talking about aluminum. But the metal’s essential to everything from cans to car parts, which makes Alcoa a bellwether stock: the company's sprawling business covers all sorts of regions and industries, which means its performance gives us a clue about economic growth as a whole.

This time around, though, global economic growth might’ve given investors a clue about Alcoa’s performance: demand for aluminum – and commodities more broadly – has skyrocketed as the world economy bounces back, and its price has risen 24% this year. Analysts, for their part, shouldn’t have been afraid to dream a little bigger: the company’s second-quarter earnings came in higher than they expected. To top things off, the company raised its shipment guidance for 2021, which should – all else being equal – translate to higher-than-expected revenue for the year overall.

Why Should I Care?

For markets: Inflation catches up with everyone eventually.
The rising prices of metals has been great for Alcoa’s earnings, sure, but higher raw material and energy prices are bound to weigh on its own profits going forward (tweet this). If the company can successfully offset those higher costs, rising profits should lead to a rising share price. But that’s a big “if”: commodity firms don’t exactly have a good track record of passing on their costs, which might be why Alcoa’s stock didn’t move much on Friday.

The bigger picture: Goldman’s a metalhead. 
Goldman Sachs thinks aluminum still has plenty of potential: the investment bank is predicting the metal’s price will rise another 20% over the next year. But you could say the bank’s more in ore of another metal at the moment: Goldman thinks supply and demand for iron ore will be out of whack until at least 2023, suggesting the commodity’s “bull market” could keep running and running.

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2. Analyst Take

How To Profit From A Shaky Housing Market

What’s Going On Here?

We’ve mentioned in a previous Insight that real estate prices are looking uncomfortably high right now – we’re talking 2008-financial-crisis high.

And there are any number of factors that could knock the market off balance, from increasingly risk-averse investors to the removal of government support measures.

No surprises, then, that more and more voices are predicting the bubble’s set to burst.

If you’re one of them, it’s true that you won’t be able to profit by trading house prices. But you can profit indirectly.

So that’s today’s Insight: the four ways you can profit from the housing market’s collapse, and the risks you ought to be aware of before you try.

Read or listen to the Insight here

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Retail Therapy

Retail Therapy

What’s Going On Here?

Looks like Americans have been browsing the rails for comfort after a difficult year: data out on Friday showed US retail sales in June came in way ahead of predictions.

What Does This Mean?

Economists had been expecting sales to drop 0.3% last month from the month before, but boy were they off the mark: sales actually rose 0.6%. There were three reasons they were right to have been skeptical, mind you. First, the effect of March’s stimulus checks should’ve worn off, meaning shoppers would have less cash to spend on nice-to-haves. Second, record-high inflation means consumers could afford less with the same amount of money (all else being equal). And third, if shoppers were expecting prices to be higher in June and beyond, they might’ve front-loaded purchases in May that they would otherwise have waited to make. Put simply, economists might not be wrong, just a little premature...

Why Should I Care?

For markets: Numbers don’t lie, but they do fudge the truth.
Consumer spending on services – retailers, restaurants, bars, and so on – represents 70% of the US economy, so these strong sales are a massive driver of all-important economic growth. But while they do suggest consumers are happy to spend their money, average US disposable income (adjusted for inflation) is still at its lowest since before the global financial crisis. In reality, then, consumer spending power is falling. Throw rising wealth inequality into the mix, and economic growth looks at risk in the longer term.

The bigger picture:
China stumbles.
Data out last week showed China’s retail sales were an expectation-busting 12% higher in June than they were the same time last year. But unlike the States, consumer spending only represents about 40% of the Chinese economy. The country’s overall economic growth, then, fell slightly short of forecasts in the second quarter, growing “just” 7.9% versus the same time last year.

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💬 Quote of the day

“I get up every morning determined to both change the world and have one hell of a good time. Sometimes this makes planning my day difficult.”

– E. B. White (an American writer)
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🎯 On Our Radar

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  3. The music industry isn’t fair. Good thing British politicians are calling for a change.
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🌏 Finimize Live

🍷 Ooh la la

Don your beret, grab your spit bucket, and raise your pinky, because we’re talking wine this week: join us on Monday for How To Invest In Wine, and you’ll find out from a true wine connoisseur how to track down the best brands, regions, and investing potential in this heady sector.

🍷 How To Invest In Wine: 6pm UK time, July 19th
🌍 Why It Might Be A Good Time To Buy Emerging Market Stocks: 5pm UK time, July 20th
💥 How To Profit From The Commodities Boom: 1pm UK time, July 21st
👟 How To Invest In Sneakers And Streetwear: 1pm UK time, July 22nd
🌿 How To Invest In The Future Of Cannabis: 6pm UK time, July 23rd
📈 How To Protect Yourself From Rising Prices: 6pm UK time, July 26th
👑 How To Invest Like The Ultra-Wealthy: 5pm UK time, July 28th
🌎 How To Profit From Emerging Markets: 6pm UK time, July 28th
🏙 Investing In A Sustainable Metropolis: 11am UK time, July 29th
♻️ How To Turn Your Portfolio Green : 6pm UK time, July 29th
💰 How To Make Money From Money: 3pm UK time, August 4th
🤔 Are You An Investor Or A Trader?: 12pm UK time, August 25th

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