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Today's big stories

US retail sales slowed last month and the Federal Reserve announced a rate hike
Our analyst has found three dips that you might want to buy, depending on which type of investor you are – Read Now
Zara's owner Inditex reported mixed results

Tight Squeeze

What’s Going On Here?

Data out on Wednesday showed that US retail sales rose by less than expected last month, but just don’t remind Americans how much they spent at the pump…

What Does This Mean?

Retail sales in the US rose by a worse-than-expected 0.3% in February from the month before, a massive drop from January’s 4.9% uptick. And while sales in bars and restaurants were up, the real bumper growth came from a 5.3% increase in gas sales – partly down to folk paying higher prices at the pump. In fact, if you strip out those mighty gas station sales, then total retail sales were actually down 0.2%. After all, sales in 6 of the 13 retail categories fell last month: online shopping was down sharply, and sales at grocery and electrical stores dropped too.

Why Should I Care?

For markets: Hikes are like buses...
Those slow sales figures might signal that Americans are tightening their purse strings as prices rise. That, then, might be why the Federal Reserve (the Fed) raised interest rates by 0.25% on Wednesday, which should help cool down 40-year high inflation. And while it’s the central bank’s first rate hike since 2018, there might not be long to wait until the next one: the Fed said it’s likely to hike rates another six times this year (tweet this).

The bigger picture: The worst is yet to come.
Households will really feel the pinch from those rate hikes, especially since inflation is also set to rise following Russia’s invasion of Ukraine. And if consumer spending – which makes up over two-thirds of the US economy – dips, economic growth could take a hit too. That might be why a survey out this week shows that economists predict there’s now a 33% chance of a recession in the next twelve months – up 10% from last month.

You might also like: The markets that could inherit a fortune from rising interest rates.

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Analyst Take

You Can Pick And Choose Your Dip, So Here’s Three You Might Like

Stéphane Renevier, Analyst

What’s Going On Here?

The macro environment is as uncertain as ever, so – rather than buying everything indiscriminately – investors should tread very carefully.

But higher volatility also creates opportunities, ones like the three dips that Stéphane’s just found.

One is opportunistic and could lead to handsome returns if markets stabilize.

The second takes advantage of a record level of income, and while it’s not exactly sexy itself, it could lead to some very good-looking returns.

The third one is for the more cautious investors, and it’s likely to outperform the broader market even if the environment gets worse.

So that’s today’s Insight: the three trades that are too cheap to ignore.

Read or listen to the Insight here

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