Last week, Coca-Cola’s stock price reached an all-time high, standing out amid market turbulence. Buffett’s keen eye is once again being discussed in the market. This article consolidates the latest podcast from The Wall Street Journal, discussing current hedging strategies and international market opportunities.
(Background: Is Buffett worried too? Berkshire Hathaway issues ¥90 billion bonds, setting a historical low record, as the Japanese stock index plummets by a thousand points.)
(Background addition: With cash on hand, Buffett has made a move! Increasing investments in Japan’s five major trading companies, is he pessimistic about the U.S. economy?)
After U.S. President Trump ignited a tariff war, global risk markets experienced turbulence, with both U.S. stocks and cryptocurrencies facing significant selling pressure in recent months. However, Coca-Cola, known for its resilience, stood out during this recent volatility, breaking through the $73 mark last week to set a new historical high.
Buffett, who has been heavily investing in Coca-Cola stocks since 1988, also reaped substantial profits. His Berkshire Hathaway is the largest shareholder of Coca-Cola, and Buffett has even pledged that Coca-Cola will be a permanent holding for Berkshire.
According to the Bloomberg Billionaires Index, as of the end of April, Buffett is the only one among the world’s top ten billionaires who has maintained positive growth this year, successfully timing the market and holding onto quality stocks, further solidifying his title as the Oracle of Omaha.
In The Wall Street Journal podcast, the hosts discussed the event of Coca-Cola’s stock price reaching a historical high. Can general investors avoid losses by following Buffett’s lead? They also focused on the investment value of the tech giants and consumer staples under the influence of tariffs. Below is a transcript of the discussion:
Telis: Hello everyone. I’m Telis Demos. I write for The Wall Street Journal’s “Street Talk.”
Gunjan: I’m Gunjan Banerji, the chief markets reporter at The Wall Street Journal. This is the “Wall Street Journal Weekly Review,” where we keep you ahead in the world of money and investments.
Telis: Each week, we engage in conversations with industry insiders and members of The Wall Street Journal’s news editorial team to discuss stocks, bonds, tariffs—lots of tariffs—
Gunjan: Lots of tariffs.
Telis: Well, you know what? Let’s get right to the point because there’s a lot going on in the market right now.
Telis: I think in the coming week, the most concerning issue for everyone will be the economic data. There are three major data releases. The first one is, of course, the (non-farm) employment report, which will be released this Friday. The last employment report was quite strong, creating 228,000 jobs. However, the unemployment rate edged up to 4.2%. Sometimes, these figures can move in slightly different directions. Technically, they come from different surveys. So, we’ll be watching to see if the economy remains strong. Then, I think the main event will be the GDP report. Many indicators, such as the closely watched Atlanta Fed report, have been predicting that GDP could potentially contract in the first quarter, following a 2.4% growth in the fourth quarter of last year. So, this would represent a fairly significant slowdown. Not all economists expect the economy to contract; the consensus is actually that the first quarter will grow by 1%. So, compared to the fourth quarter, it’s still a slowdown, but not a contraction.
And of course, there’s the PCE, the Fed’s favorite inflation gauge. The last two components of that indicator, the consumer CPI and the producer PPI, have both cooled slightly. But of course, the Fed, you know, Powell has said that this presents a challenging scenario for the Fed. You know, perhaps inflation is cooling, which theoretically could support rate cuts to ensure the economy doesn’t slip backward. But of course, there’s that big ‘T’—tariffs—looming, and the Fed really doesn’t know what impact tariffs will have on prices. So, it puts them in a tough spot, much to the president’s frustration. He doesn’t quite grasp the dilemma the Fed is in. He would prefer to just—
Gunjan: Not quite grasp it.
Telis: He’d prefer to cut rates directly.
Gunjan: So, it’s really interesting, and as everyone is worrying about whether we’re heading into a recession, this is going to be a very, very important week for economic data, right?
Telis: Do you think the market is prepared to react? Are we going to see an active market week as we get this data?
Gunjan: So far, there’s been a huge gap between how people feel about the economy and the market and what the actual data is showing, right? The employment data has remained strong so far. Spending data has also held up well. But at the same time, consumer confidence is at one of its lowest levels since 1952. So, I think the key to watch is whether we start to see some data beginning to crack, or if it’s still too early to judge because that data actually comes from before the ‘Day of Reckoning’ (when Trump announced retaliatory tariffs).
Telis: Do you think the market will feel reassured by good data, or will it see through it and say, “The main event hasn’t happened yet”? These data don’t really reflect the impact of tariffs; tariffs may have already begun to affect the data, but it hasn’t reached the level where tariffs are truly wreaking havoc.
Gunjan: Yes, because people are feeling so pessimistic about the economy. So, will this eventually seep into reduced spending? Maybe people will start laying off workers or something like that. I think this uncertainty is reflecting in some of the pricing in the market. I looked at some data from the options market. Options traders are betting that the S&P 500 will experience 1% or greater volatility on each trading day at least until May 23, whether up or down. So, this means people expect the wild volatility we’ve seen over the past few weeks to continue.
Telis: Okay, let’s talk about bonds, where there’s also been a lot of crazy volatility. However, I think as the data comes in, we’ll get more insights into the bond market situation, you know, where the money is flowing, who is buying, who is selling, and so on. In the coming weeks, we’ll also see a new round of Treasury auctions starting around next week. Interestingly, from what we’ve seen so far, it doesn’t seem as dramatic as I thought the bond market would be and as we imagined it would be. You know, whether foreign governments are selling U.S. Treasuries as part of the trade war.
Gunjan: We haven’t seen much of that yet, right?
Telis: We haven’t. No, they actually—
Gunjan: And that’s what everyone is worried about.
Telis: So far, the best information we have about foreign governments holding U.S. Treasuries, you know, we have some data up to around the first week of April. There hasn’t been a major change. In fact, it has slightly increased. Of course, this is just a proxy indicator. It’s hard to know exactly what’s happening until you look back retrospectively. We do know that investors are definitely, you know, selling Treasuries, or more accurately, I would say deleveraging, right? People are reducing risk, so they’re closing positions. This is especially true for those hedge funds that borrowed heavily to leverage their bets for greater returns. They no longer want to engage in that kind of borrowing. They want to de-risk in that manner. So, we know that has happened. But right now, what we’re seeing is that the yield on the 10-year Treasury has not skyrocketed. The situation has calmed down somewhat.
Telis: However, I have to say, gold is soaring.
Gunjan: Oh my goodness, it’s crazy.
Telis: All that glitters is gold, and it set another historical high last week. I don’t know why we wouldn’t expect this to happen next week as well. You can look at it from a couple of perspectives. First, the flight to safety, you know, at the same time it’s the other side of a weaker dollar. As the dollar weakens, it takes more dollars to buy gold. So, it’s not surprising to see this trend.
Gunjan: For the last four years, every time my mom sees me, she tells me to buy gold. Let me tell you, she has captured that macro trend. I think there’s something very important to watch in the coming weeks.
Tech Giants vs. Consumer Staples
Gunjan: How are the Magnificent 7 tech giants performing? I mean, this has been one of the hottest trades on Wall Street and among the general investing public for the past few years. Meta, NVIDIA, Tesla, you name it, all seven of these have dropped this year. As of this recording, all seven have underperformed the S&P 500 index. So, one of the crowded trades that everyone flocked to is showing cracks. I think as we move into the next few trading days, as those large tech stocks release some earnings reports, we’ll learn more about the situation.
Telis: Who’s going to report earnings?
Gunjan: We will hear from Meta, Amazon, Apple. Of course, Tesla, you know, has dropped over 30% because many people are unhappy with Musk spending so much time on government plans.
Telis: And he said he would spend less time on Dogecoin—
Gunjan: Right, we’ll see what that means for Tesla’s stock price going forward.
Telis: Yes, so I want to say, these are the seven things to watch in the coming week.
Gunjan: Yes, that’s right. So, this brings us to our interview this week, because while the Magnificent 7 may be struggling, stocks like Coca-Cola, consumer staples, McDonald’s, and Walmart have been performing very solidly recently.
Telis: So, is this the other side? If you’re not buying tech stocks, you’re buying the opposite, you know, McDonald’s, Walmart.
Gunjan: I mean, that seems to be what people have been doing recently.
Telis: Well, we’ve invited Markus Hansen to talk about whether it’s the time for household name brands to shine. We’re talking about Coca-Cola, Kellogg, which produces products like Pringles, Cheez-Its. Also Mondelez, the company that makes Oreo and other snacks. Markus Hansen is a portfolio manager and research analyst at Vontobel Asset Management, which specializes in U.S. and international stocks. They have a couple of stocks and invest in different sectors, luxury goods, technology, and consumer staples, which we are discussing here.