The Week Of Household Brand Reports Is Upon Us

 

Throughout the last couple of weeks, we've been watching as earning report after earning report has surfaced. This week's line up of reports may be more exciting than anything we've seen yet this quarter. That's because the reports planned to be released not only give us a glimpse into the assets producing the reports, but they will also give us an idea of what to expect in the United States economy moving forward. Today, we'll do a quick overview of the reports coming out this week, talk about why the reports give us a view into what to expect from the US economy moving forward, how solid reports can be the final nail in the coffin for low interest rates from the Federal Reserve, and why I'm hoping that the reports are not as good as they're expected to be.

Earning Reports Expected This Week

The earning reports that we'll be seeing this week include quite a few major household brands. Here's the schedule…

• Tuesday 2/10/2015 – Coke's report becomes available.
• Wednesday 2/11/2015 – Pepsi's report becomes available. Whole Foods will also be releasing their report.
• Thursday 2/12/2015 – Kraft and Kellog will be releasing their reports.

So, do you notice anything these brands have in common? They are all considered pantry brands; the types of brands that fill refrigerators and cupboards across the United States.

Why These Reports Give Us Insight Into What To Expect From The US Economy

With all of the data we've been getting lately, it seems as though the United States economy is doing great. In January we added 257,000 non-farm jobs (far more than expected) and the cost of oil is starting to stabilize a bit. However, when talking about where the economy will go, several factors will come into play; one of the biggest is consumer spending! After all, it's great to add jobs, but if the added jobs don't lead to more consumer spending, we've got a big issue!

The reports that will be coming out throughout next week include the types of brands that have proven to be great indicators with regard to consumer spending. If people are more comfortable spending money, they're most likely going to drink more soda, eat more snacks, and make sure their kitchens are full of all of their favorite foods. So, if the reports from the companies mentioned above are overwhelmingly positive, they will tell us that the majority of Americans are becoming more and more comfortable with spending. On the other hand, if the reports are negative, they will tell us that American consumers are still worried about the state of the economy in the United States.

Why Solid Reports Will Most Likely Equate To Higher Interest Rates

Following the financial crisis felt in 2008 and 2009, the Federal Reserve reduced interest rates and enacted quantitative easing in an attempt to assist the United States' economic recovery. When the stimulus was put into place, everyone knew that it couldn't last forever. In 2014, the Federal Reserve ended quantitative easing. Since then, a big topic of conversation has revolved around how long the Federal Reserve will keep interest rates low.

Because the low interest rates were put in place in an attempt to stimulate the economy, one would imagine that when the economic data is back up to par, the interest rates would be increased to match. With the oil market leveling off, the United States adding 257,000 new jobs in January, and other positive economic data surfacing, positive “pantry reports” could be the data point that pushes theFederal Reserve to act quickly with regard to raising rates.

Why I'm Hoping For A Miss

Don't get me wrong, I'm all for growth in the United States economy. However, I also think that it's important to see economic growth on a more sustainable pace. The bottom line is that while economic growth is becoming more steady, the United States isn't ready for higher rates. We're already starting to have problems as a result of the growing US Dollar. Several earning reports included language that would lead investors to believe that a strong US dollar is hurting foreign sales. Until other economies around the world start to move in the positive direction, we're still going to have this problem. Adding higher interest rates on top of the mess could create heavy market volatility and prompt a market correction.

Final Thoughts

Although I'm hoping for the opposite, all in all I think we are going to see positive reports from the major pantry brands next week. With so many new jobs added, I couldn't imagine that people aren't spending more money. While in the beginning, positive reports show economic growth and will  increase faith in the US economy as a whole, I am concerned about what this could lead the Federal Reserve to do with interest rates and the long term affects of a premature rate hike. I'll keep a close eye throughout the week and keep you posted on my findings!