VIDEO: Keep Your Eyes on This Holding as More Consumer Companies Report

In today’s TheStreet Pro Portfolio Daily Rundown video, Chris Versace discusses the initial market reaction to Wednesday’s Fed policy meeting and explains why he is not necessarily on board with Jerome Powell’s use of the word “transitory” when it comes to tariff inflation pressures. We share what we’ll be focused on as potential Trump tariffs return, including these upcoming economic data points. 

Chris then shifts gears to discuss what the portfolio will be looking for in earnings this morning from Darden Restaurants DRI and Shoe Carnival SCVL and updates our plan for Mastercard MA. 

We close today’s video getting you ready for the earnings on deck after Thursday's market close, which will do more than shape how the market closes out the week.

Transcript

CHRIS VERSACE: Hey folks, Chris Versace here at March 20th, better known as the day after the Fed's policy decision. Excuse me. And as you could probably see, equity futures have been bouncing around a little bit this morning as the market tries to digest, wrap their head around Fed Chair Powell's comment yesterday, that inflation due to tariffs is likely to be transitory. That is a somewhat dirty word, as we know these days, given the past history of the Fed with the word transitory.

But as we laid out in yesterday's Daily Rundown, where we assessed the Fed's latest policy decision, we discussed the updated set of economic projections, our takeaway message to you is that we are going to take a wait and see approach as it relates to tariffs, inflation, and what that means for potential Fed rate cuts in the balance of 2025. The updated set of projections continues to show two. But again, as we laid our thoughts out to you, when we follow the data, we think that the Fed's July policy meeting is really going to be the one to watch. The reason, again, for that is we'll have a lot more data. If expected, Trump tariffs and reciprocal tariffs go into effect in the month of April.

So we know that the President likes to keep folks off balance. He does a pretty good job of that, including the market. And he fancies himself a good deal negotiator.

So what does this mean for us between now and into April? It means, very simply, that we're going to have to keep our ears to the ground, assessing not only the latest data for the economy and for various industries but also for what Trump is saying. So we can assess whether or not these tariffs are going in.

If they are going in, how big are they? What's the likely duration? Are there ongoing negotiations? Could we even see a potential pushback on the date? So all of these things are going to be in play.

So again, we're going to have to really be very, very mindful about a lot of information coming, updating our thinking along the way. But you know that is what we do here at the Portfolio. And we will continue to share those thoughts with you.

Coming out of Fed Chair Powell's comments, are we surprised that we see President Trump calling for the Fed to deliver rate cuts as the economy eases into tariffs? No, we're not surprised. We said a long time ago that there was likely to be a showdown between these two.

And so far, to his credit, Powell has really held his ground on the Fed remaining independent. But at the same time, we have to remember that recently even President Trump kind of indicated there could be some pain, a period of transition, I think he called it, transitory transition. I don't know what it is with these guys.

But Trump said that, of course, meaning that we could see some pain as tariffs are felt. Maybe that explains why he's calling for the Fed for lower interest rates. But I think he was going to do that anyway, to be candid.

But for us, again, it's just another reason for us to be very mindful of the data day to day, week to week over the next several weeks and updating our thinking as we do so. Remember that we have a very light economic calendar today and tomorrow. And I think tomorrow, we actually get our first Fed speaker making the rounds. I think it's Williams.

So the real next meaningful data point that we're going to want to pay attention to will be on Monday. That is the flash March PMI. And as we tend to do, we're going to dig through it for what it says on the manufacturing and services economies, what new orders tell us about how the start of the second quarter is likely to be, but also what's happening on the jobs front.

Remember, we saw that big, big, big pop in the challenger job cuts report. Are we seeing businesses slow their hiring in March? Or is it accelerating? And if so, what does that mean?

And then finally, of course, the inflation front-- input costs, output costs. How does it trend relative to the last few months? Accelerating, just remaining sticky. So we're going to have a lot more insight on that Monday afternoon.

But between now and then, this morning, We have earnings-- sorry-- from Darden Restaurants. And we're going to look to see if they confirm the trade down in restaurant spending that we saw in the recent retail sales report. We'll also be looking for their comments on inflation and anything they might say on tariffs, which probably more along the lines of input costs.

Remember, this kind of follows what General Mills said yesterday, where they are seeing a slowing in snacking. They also said they see going forward their organic sales declining 1 and 1/2% to 2%. They also commented that they were seeing higher inflation in both ingredients and packaging.

So our thought that as we move into the March quarter earnings season and June quarter guidance that margins would be key shaping up. We also want to pay attention this morning to what Shoe Carnival has to say. It's just going to be another look at the consumer.

And as we digest kind of all of these comments, we will be keeping a close watch on the shares of Mastercard. With the market rally yesterday, they did pop above the 100-day moving average. And they now face resistance near the 50-day, clocks at around 5:45.

And as we mentioned to you, as the shares rebound, our thought is that we are likely to harvest some of those gains just given the increasing data points, the more frequent number of data points, about consumer, consumer spending, consumers trading down. So we'll continue to watch that.

After today's market close, we do have more meaty, if you will, earnings reports coming from FedEx, Nike, Micron. We talked about these earlier in the week. And yes, we continue to think that what they deliver will set the tone not only for the March quarter earnings season but for June quarter guidance.

So again, we'll be focusing really on the read-through to their end markets about the economy, comments on tariffs, and, of course, with Micron a little more specifically, what they have to say about AI, data center, smartphone, PCs, and the like as it relates to some of our other holdings in the portfolio. So we'll be assessing all of those earnings and what they mean after today's market close. And we'll be sharing them, obviously, with you tomorrow in our comments for the portfolio but also because I will be sitting in for Doug Kass at the Daily Diary.

So if you're not frequenting the Diary, I would urge you to come join us. It's a great environment. A lot of spirited conversation in the comments. I think you'll get a lot out of it.

But remember, we're going to have a lot more coming at you today. So please be sure to check your emails. Check your alerts. We don't want you to miss anything. And as I have to say, should we make any moves with the portfolio, we want to make sure that you are right there with us. Thanks for watching.

At the time of publication, TheStreet Pro Portfolio was long MA.