Trump Tariff Update Could Speed Exit From This Holding
Here’s how we’re thinking about this payment processing position.
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Concerns over the consumer and their spending have been building, and earlier this month we downgraded shares of Mastercard MA to a Four rating and started to dial back the Portfolio’s exposure to them.
Adding to those concerns is the weak March Consumer Confidence report out on Tuesday morning as well as cautious comments from Synchrony Financial SYF about consumer spending.
Mastercard shares are poised to bump up against their 50-day moving average and the potential for them to move past rests on what we hear in the coming days for Trump tariffs or trade deals. Should they grind their way higher on such news, we’ll want to use that strength to further unwind the position. But if any Trump-related tariff news doesn’t lead MA shares to move past that resistance level, we may accelerate the Portfolio’s exit.
Consumer Confidence
The March reading for Consumer Confidence fell to 92.9 from the revised 100.1 in February, missing the 94.0 market consensus, and marking the fourth sequential decline in the data. As we know, what happens below the headline figures tells the real story and that is the case with this report:
“Consumers' expectations were especially gloomy, with pessimism about future business conditions deepening and confidence about future employment prospects falling to a 12-year low.
"Meanwhile, consumers' optimism about future income — which had held up quite strongly in the past few months — largely vanished, suggesting worries about the economy and labor market have started to spread into consumers' assessments of their personal situations."
The second part of that is what adds to consumer discretionary spending concerns as does the proportion of consumers anticipating a recession over the next 12 months remained steady at a nine-month high. Consumers also expect more inflation pressures with the average 12-month inflation expectations rose to 6.2% in March, up from 5.8% in February. Not something that is going to spark consumer spending and it also won’t be missed by Fed officials. But it is something that keeps upbeat on Costco COST and Amazon AMZN.
Synchrony Said What?
On Tuesday morning, Synchrony Financials’ Chief Credit Officer Max Axler shared that, "Purchase volumes have gone down across the industry as consumers across all income groups become more thoughtful about spending…"
For those less than familiar with Synchrony, the company is a credit card issuer that partners with retailers and other merchants and has more than 100 million consumer credit card accounts.
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At the time of publication, TheStreet Pro Portfolio was long MA, COST and AMZN.
