Earnings season, China’s real estate crisis, and the war in Israel

Hello Folks,

Today, we take a look at the upcoming earnings season, China’s real estate crisis, and the ongoing war in Israel. So, let’s get into it.

Consumer beverage giant Pepsi announced its Q2 results yesterday and reported earnings of $2.25 per share, above estimates of $2.15 per share. Its sales stood at $23.45 billion, vs. estimates of $23.39 billion.

Pepsi now expects earnings to widen by 13% in 2023, up from its earlier forecast of 12%. The beverage heavyweight has raised its outlook for the third consecutive quarter.

Inflation might have whole countries down in the dumps, but it won’t get Pepsi. The drinks and snacks giant pulled up prices to even out higher costs, confident that loyal shoppers wouldn’t dare to switch to supermarket alternatives or a certain famous competitor.

Defense Stocks Rise As Tensions Escalate In The Middle East

Defense stocks have seen some choppy waters lately, primarily because of how U.S. political disputes might impact the country’s spending projections. But the rising conflict in Israel has had them all pointing higher this week.

Defense stocks have seen a notable uptick as the deepening conflict suggests a surge in demand for military essentials from weaponry to surveillance tools. And that rise in demand may swell beyond borders: conflicts have a way of encouraging other countries to bolster their defenses, sometimes in anticipation of ripple effects or broader regional unrest.

The iShares U.S. Aerospace & Defense ETF (Ticker: ITA; expense ratio: 0.4%) gained almost 5% on Monday, with its mix of both defense and non-defense stocks.

China’s Real Estate Crisis Continues to Worsen

Yesterday, Country Garden, a Chinese property developer, stated it would not be able to repay a $60 million loan on time, showcasing the crisis surrounding China’s real estate sector, which accounts for 25% of total GDP.

The U.K. Targets 146 Crypto Companies

The FCA, or Financial Conduct Authority, regulates the financial markets in the U.K. and warned 146 crypto companies, including KuCoin and Huobi.

FCA accused these companies of illegally promoting cryptocurrencies and wants them to register as crypto asset providers. Compared to the SEC (the U.S.-based regulator), the FCA is much more flexible in its crypto policies and has already approved over 50 digital asset company registrations.

The FCA is now working with crypto giants such as Binance and OKX to ensure their U.K. businesses are compliant.

Headlines You Can’t Miss!

China’s consumer spending is still below pre-pandemic levels

Worst U.S. bond sell-off since 1787 marks end of free-money era

U.S. tech stocks are overvalued, warns the Bank of England

Samsung’s profits fall 78% in Q2

Gemini expands crypto operations in India

Chart of the Day

We’re in the midst of the second-most aggressive cycle of interest rate hikes in the history of the Federal Reserve and hope to see a soft landing. But almost every one of the Fed’s past hiking cycles led to a hard landing – that is, a recession.

The combination of dwindling savings, the resumption of student loan payments, and increasing interest and gas costs is poised to dent consumer spending, which is the biggest driver of the U.S. economy.

With markets appearing to be underestimating the risk of a hard landing, you may want to exercise caution with your portfolio by reducing risk, avoiding leverage, holding cash, investing in gold and long-term government bonds, and tilting your stock exposure toward defensive sectors.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.