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Another Gold Spike

The market is off to a quiet start this week as traders await Trump’s big meeting with China’s Xi Jinping at the G20 summit.

Meanwhile, tensions continue to escalate between the U.S. and Iran.

“President Donald Trump on Monday unveiled sanctions on Ayatollah Ali Khamenei and eight senior military commanders that deny him and his office access to financial resources,” Bloomerg reports. “Treasury Secretary Steven Mnuchin said financial restrictions would also be introduced against Iran’s Foreign Minister Javad Zarif later this week.”

In retaliation, Iran announced “the permanent closure of the diplomatic path with the government of the United States”.

Despite the threats, stocks barely budged early this morning. Oil is lower. Gold is the only asset reacting to these developments. It’s surging to new six-year highs as I type.

In other news, Trump is foaming at the mouth for a rate cut.

Our Economist-in-Chief took some thinly-veiled shots at Fed chair Jerome Powell Monday morning, claiming the fed is acting like a “stubborn child” and blowing its chance to spark a huge bull market and strong GDP growth.

Donald

Donald

Maybe Trump wants the Fed to step aside and let him call the shots. We’ll see how this shakes out in July when it’s time for another decision on rates.

Turning to consumer stocks, the big soda brands are bracing for a plastic bottle crackdown.

“A wave of bans on plastic straws last year demonstrated a sharp turn in public opinion against single-use plastic,” The Wall Street Journal reports. “The momentum has continued into this year, with the European Union in March voting to ban 10 single-use plastic products including cutlery, plates and cotton-swab sticks. Earlier this month, Canada said it planned to ban single-use plastics such as bags, straws and stir sticks as soon as 2021. Now the beverage giants are preparing for the possibility that U.S. states could begin banning plastic bottles, as a few municipalities already have done.”

The biggest purveyors of single-use plastic bottles are none other than the big cola brands, PepsiCo Inc. (NASDAQ:PEP) and Coca-Cola Co. (NYSE:KO). But Pepsi and Coke are apparently keenly aware of what might happen should plastic bottles become an ancient relic.

That’s why water fountains have become the latest weapons in the war between Pepsi and Coca-Cola. Both companies are experimenting with high-tech water fountains to combat waste from water bottles, The WSJ notes.

Coca-Cola’s machine is called the PureFill. Water connoisseurs can purchase their beverages with Apple Pay, through an app, or possibly by swiping a card. Leave it to the brands to develop an app for going to the water cooler…

The water fountains offer flavors and carbonation for about five cents per ounce. Unsurprisingly, the most popular variety is the free option: plain ol’ water.

We’ve discussed America’s new obsession with cutting sugar on several occasions over the past few years. In fact, a nationwide sugar aversion has crushed soft drink consumption for the better part of the past decade.

Soda consumption has plunged to levels last seen nearly 30 years ago. Since 1998, per capita consumption has declined from 53 gallons to 41 gallons, according to RBC Capital Markets.

Yes, the sugar peddlers have wised up to our attempts to get fit. They’ve spent years diversifying beyond their standard offerings to combat this societal shift. You might remember that Coca-Cola bought Vitaminwater back in 2007. The company has even come out with a stable of new Diet Coke flavors this year ranging from Ginger Lime to Zesty Blood Orange to lure younger customers. PepsiCo joined the water wars last year when the company coughed up $3.2 billion to purchase SodaStream International, maker of home-carbonation machines that allow customers to make their own beverages in reusable containers.

No matter what happens investors have already rewarded Coca-Cola and PepsiCo for their efforts. Both stocks are dominating the averages, rising more than 5% this month while posting new all-time highs:

KO

Both PepsiCo and Coca-Cola have outpaced the S&P 500 by a wide margin over the past 12 months. While PEP and KO have gained 28% and 24% respectively, the S&P is up just about 7% over the same timeframe.

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Rude Awakening PRO and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing for 13 years. In 2018, Greg’s Rude Awakening PRO portfolio beat the S&P 500 by 14%.

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