‘Public confidence in Trump’s economic plan falters.’ 😐 Polls released days before the President's first 100 days have revealed a widespread drop in his approval ratings:

• Reuters/Ipsos survey — currently around 36% of Americans approve of Trump’s handling of the economy 
• Pew Research Center survey — showed around 59% of Americans disapprove of Trump’s tariff policies 
• CNBC All-America Economic Survey — found 44% of Americans approve of Trump’s handling of the presidency; while 55% disapprove of his managing the economy 

‍‘The (CNBC) survey found that the boost in economic optimism that accompanied Trump’s election in 2024 has disappeared, with more Americans now believing the economy will get worse than at any time since 2023 and with a sharp turn toward pessimism about the stock market.’ — Steve Liesman, senior economics reporter, CNBC

Consumer discretionary spending dropped in Q1

The S&P 500’s first quarter report card’s out. 📃 The worst performer of the 11 sectors on the index was ‘consumer discretionary’. That’s disposable income (money not needed to cover everyday costs) used to buy non-essential items, like entertainment, luxury products, and leisure activities — aka, the fun stuff. The sector makes up around 10% of the S&P 500 and fell 13.8% during the first quarter.

Recession ‘flashbacks’. 😓 Instead of data, some Millennials and Gen Xers use their own economic indicators, such as ‘recession blonde’. Some are even sharing 2008 flashbacks of the Global Financial Crisis (GFC) and offering hacks for surviving tough economic times. 

But… the US economy might be doing just ‘fine’?

US economy indicators are positive. 📊 Despite recent ‘whiplash on Wall Street’ and ‘gyrating’ markets, the US economy is bigger and more dynamic than just Wall Street. 

According to the Wall Street Journal’s chief economics commentator Greg Ip, current US economic data, such as the Consumer Price Index and the US unemployment report, are relatively unchanged. Meaning, Trump’s economy ‘looks a lot like the economy when Biden was still president’, with a caveat that it’s still early days to see any possible impacts of proposed tariffs.‍

‘This is definitely a time of frayed nerves, certainly among investors and consumers. But the economy overall, looks fine.’ — Ip, The Journal podcast, WSJ

And on the day Kiwis commemorated Anzacs, California overtook Japan as the world's fourth largest economy. 

A mixed bag of earnings for iconic US cheap eats

US consumers aren’t reaching for comfort food. 🌮 Fast dining restaurants have historically done well during economic uncertainty because of their affordability and and convenience. But it appears that the first quarter of 2025 foot traffic and in-store spending has dropped for some. 

‍Restaurant Business editor and chief Jonathan Mays has called it ‘a tough quarter for restaurants’ saying ‘everybody is not doing well right now’. He also discusses in his podcast a couple of ‘notable exceptions’, Brinker International’s Chili’s restaurants, and Taco Bell, owned by Yum! Brands.

• Domino’s Pizza (DPZ) — despite their stock climbing nearly 10% year-to-date (YTD), Domino’s CEO Russell Weiner told CNBC’s Jim Cramer that, ‘we missed a little bit’, citing ‘a challenging global macroeconomic environment’. Future plans include a partnership with DoorDash (DASH) and stuffed crusts, which could be something to salivate over.
• Yum! Brands (YUM) — Pizza Hutt’s saw a 2% drop in same-store sales, while Taco Bell was ‘firing on all cylinders’, said CEO David Gibbs. The fast food mecca reported net income of US$253 million vs 2024’s Q1 of US$314 million, 19.43% lower.
• McDonald’s (MCD) — consumers don’t appear to be beating a path through the Golden Arches either, with McDonald’s reporting the ‘largest US same-store sales decline since 2020’, only just beating earnings per share (EPS) but a drop in revenue. CEO Chris Kempczinski said they’d seen a drop in low and middle income diners, saying it’s ‘a clear indication that the economic pressure on traffic has broadened’.‍
• BJ's Restaurants (BJRI) — Simply Wall St called it ‘a pretty great week’ for BJ’s investors with shares surging 14% after their Q1 earnings results. BJ’s profit rose 48% higher than expectations, at US$0.58 per share — but Simply Wall St forecast in the current US economic climate, ‘revenue growth will slow down substantially’.
• Cheesecake Factory (CAKE) — Is the Cheesecake Factory an outlier? Zacks seems to think perhaps, as did Cramer in March, saying, ‘You’ve got a winner in Cheesecake Factory’. The casual dining chain delivered in Q1 results, with total revenue lifting to US$927.2 million, up from US$891.2 YOY — an increase of nearly 4%. CEO David Overton said that the positive results were led by ‘consistent consumer demand for the high-quality, differentiated dining experiences we provide’. 
• Brinker International (EAT) — reported Q3 earnings in March with Chili's restaurants increasing same store sales by 31% with consumer traffic up 21%. President & CEO Kevin Hochman said ‘the fundamentals of great food, great service in a fun, friendly atmosphere is clearly winning with guests’. This week, Zacks reported Brinker appeared on their list of the most searched stocks.
• Wingstop (WING) — reported US$171.09 million in revenue for the quarter ended March 2025, a YOY increase of 17.4% — beating Zacks’ EPS estimates three quarters of four. But Zacks’s caveat is that in the Zacks Industry Rank, Retail - Restaurants, ‘is currently in the bottom 17%’ of 250+ Zacks industries.
• Starbucks (SBUX) — Are consumers choosing iced latte toothpaste over Starbucks? 🦷 The coffee company last week missed both earnings and revenue estimates, but CEO Brian Niccol gave the story more froth saying, thanks to their ‘Back to Starbucks’ campaign, they’re ‘seeing changes in our coffeehouses’. CFO Cathy Smith suggested a more decaffeinated forecast, saying they’re facing ‘some challenges as we navigate a dynamic macroeconomic environment, including tariffs and volatile coffee prices’.
• Chipotle Mexican Grill (CMG) — CEO Scott Boatwright suggested that the drop in same-store sales (0.4%) could be due to tightened household budgets: ‘We could see this in our visitation study, where saving money because of concerns around the economy was the overwhelming reason consumers were reducing the frequency of restaurant visits’.
• The Wendy’s Company (WEN) — JPMorgan analysts upgraded Wendy’s to ‘underweight’ this week, adding that the franchise ‘provides a value-oriented opportunity as we see significant upside’ despite missing most Q1 targets. Wendy’s appeared less optimistic for 2025, lowering their 2-3% growth expectations to a possible drop of 2% for the year. CEO Kirk Tanner says Wendy’s is planning a 100 Days of Summer promotion offering value when ‘our customers need it most’.

Could consumer staple ETFs provide diversification?

Everyday items still fill American’s trolleys. 🛒 Despite a potently bumpy outlook for consumer discretionary spending, consumer staples could be a counter-weight option during uncertain trade economics for investors looking to diversify their portfolio. Consumer staples are generally considered a defensive sector, meaning they tend to perform well during economic downturns or during market volatility. 

Here's how Consumer Staple exchange traded funds (ETFs) performed over 6-months:

• iShares Global Consumer Staples (KXI)
• iShares US Consumer Staples ETF (IYK)
• Fidelity MSCI Consumer Staples ETF (FSTA)
• Vanguard Consumer Staples ETF (VDC)
• SPDR Consumer Staples Select Sector (XLP)
• Invesco S&P 500 Equal Weight Consumer Staples ETF (RSPS)
• FirstTrust Consumer Staples AlphaDEX ETF (FXG)

The global ETF iShares Global Consumer Staples (KXI) tracks the S&P Global 1200 Consumer Staples Index, which includes stocks from the US, UK, Switzerland, Japan, France, Canada, The Netherlands and others. It has performed higher than the US-equity consumer staple ETFs over 6 months. This could relate to cautious spending in the US (with potential tariff costs on the horizon for Americans) which is offset in this ETF by the wider global market. 

Looking at top performer iShares US Consumer Staples ETF (IYK), reasons it’s a little ahead could be because of:

• Diverse holdings — includes a broad range of consumer staples companies, providing exposure to various segments within the sector, such as food, beverages, household products, and personal care
• Strong stock performance — The ETF's top holdings include major companies like Procter & Gamble (PG), Coca-Cola (KO) and  PepsiCo (PEP) that have shown consistent revenue streams
• Dividend yield — IYK offers one of many competitive dividend yields in the group, which can appeal to income-focused investors

Expense ratio — While IYK's expense ratio of 0.40% is slightly higher than some other consumer staples ETFs, the fund’s strong performance and returns may justify the cost for many investors

The fight of the fizzies: Coke v Pepsi

Is politics making a US icon unpalatable for some? 🥤 Consumer staple brands Coca-Cola (KO) and PepsiCo (PEP) might be gloving up in supermarket aisles. Following the fall-out from Trump’s dismantling of diversity, equity, and inclusion (DEI) programs, some American consumers have fought to uphold values and change some purchase decisions. 

While Coca-Cola beat on earnings and revenue in their first quarter (Q1), thanks to unit case volume growth in India, China and Brazil, their US sales declined by 4% year-over-year (YOY), and net revenue fell by 2% YOY, to just US$1.1 billion. Likely prompting Jim Cramer’s comment saying Coca-Cola’s standing out in consumer discretionary stocks, and is ’still hanging in there after a brutal week for the cohort’. 

But there’s been drama. 🎭 During his earnings call, Coca-Cola CEO James Quincey appeared to address a TikTok video that amassed 1.1M likes. He indicated that the TikTok’s suggestion that Coca-Cola fired Hispanic workers and reported them to immigration was false. But he added that decreased sales ‘volume was impacted by weakening consumer sentiment as the quarter progressed, particularly among Hispanic consumers’. 

The reaction to Coke could be part of the wider Latino Freeze Movement, which calls on America’s almost 20% Latino population to boycott the US companies allegedly supporting Trump’s DEI repeals. And in the case of Coke v Pepsi, it resulted in some supermarket aisle wars.

But Pepsi has their own battles to fight after issuing mixed quarterly results and cutting their forecast in the face of subdued markets and uncertain consumer behaviour:

‍‘As we look ahead, we expect more volatility and uncertainty, particularly related to global trade developments, which we expect will increase our supply chain costs.’ — PepsiCo CEO Ramon Laguarta

Time, perhaps, for fizzy fresh marketing ideas to win back consumers on both sides of the aisle? 🛒

‍

Like this? 👍 Then you might like: EV market rising but Tesla sales decline ⚡

^{Never miss a Hatch article. Catch up here! 📰} 

‍