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Decline

17-01-2024 · Insight

Consumer trends in 2024: The resilient shopper

Markets are still facing a wall of worry, but in an ever-changing consumer landscape, moderating inflation, strong household finances and the likelihood of interest rate cuts give us reasons for confidence.

    Authors

  • Jack Neele - Portfolio Manager

    Jack Neele

    Portfolio Manager

  • Daniel Ernst  - Portfolio Manager

    Daniel Ernst

    Portfolio Manager

  • Richard Speetjens - Portfolio Manager

    Richard Speetjens

    Portfolio Manager

Summary

  1. Moderating inflation supports consumers and markets

  2. Weight loss drugs and influencer brands challenge staples companies

  3. ‘Magnificent Seven’ earnings outlook outpaces the market

Inflation and market dynamics

2024 will see moderating inflation positively impacting consumers and markets. Despite potential economic concerns like geopolitical tensions and a global economic slowdown, we believe strong household finances and the prospect of interest rate cuts will support consumer spending. The US economy showed resilience in 2023 despite challenges, with inflation falling and wage growth outpacing inflation, which boosted consumer confidence. Retail sales, excluding autos, have begun to outpace inflation.

Figure 1: Viewed from a historical context, consumer confidence is currently at relatively healthy levels

Figure 1: Viewed from a historical context, consumer confidence is currently at relatively healthy levels

Source: Bloomberg, Robeco

Consumer staples however are facing one of their toughest periods, underperforming for two consecutive years. High inflation and rising interest rates have led to a market reset while changing market dynamics are impacting previously defensive product categories.

Consumer Trends

Consumers appetites are changing, your portfolio should too
Discover more
View all themes


The rise of GLP-1 drugs

GLP-1 drugs, initially for Type 2 diabetes, are gaining traction as weight loss solutions, significantly affecting consumer spending on food, especially in the US. This trend poses a risk to companies producing processed foods and beverages.

Figure 2: The gap between stocks deemed to be beneficiaries/victims of GLP-1 drugs has risen throughout 2023

Figure 2: The gap between stocks deemed to be beneficiaries/victims of GLP-1 drugs has risen throughout 2023

Source: Morgan Stanley, Bloomberg, Robeco. December 2023

Influencers building brands

Social media influencers and celebrities are disrupting consumer markets by launching their own brands. While this trend isn’t new, having impacted liquor and beauty categories in the past, it’s now spreading to other mass-market categories like candy, snacks and sports drinks. In some cases, these brands, often launched at lower prices, are rapidly eroding the market share of established companies.

Figure 3: Hershey’s shares have melted after a YouTube star launched a rival brand

Figure 3: Hershey’s shares have melted after a YouTube star launched a rival brand

Source: Robeco, Bloomberg

Impact on Robeco Global Consumer Trends strategy

In response, we are adjusting our exposure to consumer staples, while investments in companies less affected by these trends are maintained. The focus is also on health and well-being, beauty, and personal care sectors.

Global Consumer Trends F GBP

performance ytd (30/04)
-4.14%
Performance 3y (30/04)
7.65%
since inception (30/04)
12.51%
total size of fund (30/04)
2882mln
morningstar (30/04)
View the fund
Past performance is no guarantee of future results. The value of the investments may fluctuate. Annualized (for periods longer than one year). Performances are net of fees and based on transaction prices.

Performance of the ‘Magnificent Seven’

In 2023, the ‘Magnificent Seven’ (Apple, Amazon, Alphabet, Nvidia, Meta Platforms, Microsoft, Tesla) significantly outperformed the market. Their diverse and resilient business models, along with strong balance sheets, position them for continued success. Despite high valuations, their growth prospects remain attractive.

Figure 4: Magnificent Seven revenue & growth forecasts, USD billions

Figure  4: Magnificent Seven revenue & growth forecasts, USD billions

Source: Bloomberg, Company filings

Outlook for 2024

Overall, consumer spending in 2024 looks promising. Factors like lower gasoline prices, a strong labor market, and easing borrowing costs should support consumer spending. Growth in ecommerce, electric vehicle sales, global advertising, and IT spending are key trends to watch. The Magnificent Seven are expected to see continued revenue and earnings growth, albeit at a moderated pace compared to 2023.

Download the full Global Consumer Trends Outlook for 2024 here


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Important information This disclaimer applies to any documents and the verbal or written comments of any person in presentations or webinars on this website and taken together is referred to herein as the “Information”. The services to which the Information relate are NOT FOR RETAIL CLIENTS - The information contained in the Website is solely intended for professional investors, defined as investors which (1) qualify as professional clients within the meaning of the Markets in Financial Instruments Directive (MiFID), (2) have requested to be treated as professional clients within the meaning of the MiFID or (3) are authorized to receive such information under any other applicable laws and must not be relied or acted upon by any other persons. This Information does not constitute an offer to sell, or a solicitation of an offer to buy, any financial product, and may not be relied upon in connection with the purchase or sale of any financial product. You are cautioned against using this Information as the basis for making a decision to purchase any financial product. To the extent that you rely on the Information in connection with any investment decision, you do so at your own risk. The Information does not purport to be complete on any topic addressed. The Information may contain data or analysis prepared by third parties and no representation or warranty about the accuracy of such data or analysis is provided.
In all cases where historical performance is presented, please note that past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. Robeco Institutional Asset Management B.V. (“Robeco”) expressly prohibits any redistribution of the Information without the prior written consent of Robeco. The Information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is contrary to law, rule or regulation. Certain information contained in the Information includes calculations or figures that have been prepared internally and have not been audited or verified by a third party. Use of different methods for preparing, calculating or presenting information may lead to different results. Robeco Institutional Asset Management UK Limited (“RIAM UK”) is authorised and regulated by the Financial Conduct Authority. RIAM UK, 30 Fenchurch Street, Part Level 8, London EC3M 3BD (FCA Reference No:1007814). The company is registered in England and Wales under Ref No. 15362605.

In all cases where historical performance is presented, please note that past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. Robeco Institutional Asset Management B.V. (“Robeco”) expressly prohibits any redistribution of the Information without the prior written consent of Robeco. The Information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is contrary to law, rule or regulation. Certain information contained in the Information includes calculations or figures that have been prepared internally and have not been audited or verified by a third party. Use of different methods for preparing, calculating or presenting information may lead to different results. Robeco Institutional Asset Management B.V. is authorised as a manager of UCITS and AIFs by the Netherlands Authority for the Financial Markets and subject to limited regulation in the UK by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request.