Update - June 20, 2023

Whirlpool Is Taking Off

Our shares of Whirlpool (WHR) are taking off – they’re up double digits in the last few weeks.

It’s no surprise. What’s happening with this American icon is symbolic of the action across the nation’s economy.

For one, signs of a revenue-zapping recession are easing. The latest data shows that buyers are becoming less concerned about inflation… and overall consumer sentiment is hitting levels we hadn’t seen in several months, rising 8% since the last reading.

Interestingly (and perhaps ominously), CNN’s much-watched Fear & Greed Index is nearly pegged to the upside. It’s deep in bullish territory with an “Extreme Greed” reading.

Source: CNN; As of June 20

It makes sense. Stocks have rebounded in recent weeks as Jay Powell and his team at the Fed have hit the market with a somewhat dovish tone (at least for now). The Nasdaq is putting in a tremendous first half of the year… up 30%. And the S&P 500 is now within a single-digit move of its all-time highs.

For Whirlpool, it’s good news. Its revenue greatly hinges on how consumers are feeling. When times are good (like when stocks are climbing and folks aren’t worried about inflation), consumers tend to buy more big-dollar items – like appliances.

This upturn comes at a good time for the company. In the first quarter, waning consumer confidence dragged product demand down by about 5% – right in line with estimates. It had management reaffirming its full-year EPS guidance of $18 to $20.

But remember, those estimates were made during a time when a recession seemed imminent and consumer sentiment was believed to be headed even lower.

That means this latest uptick in demand is not baked into the company’s estimates and could lead to a strong surprise in its next quarterly earnings announcement.

Shares will continue to rise as the market figures out just how long consumers will remain upbeat.

So far, it’s very good news for Whirlpool shareholders.

But there is a key caveat in all of this.

The Federal Reserve is unlikely to tolerate stocks reaching all-time highs… especially with the jobs market remaining red-hot and inflation still more than twice its benchmark.

It’s crucial to remember that Powell paused rate hikes this month after witnessing some deterioration of our nation’s economic health. But the mere hint of a pause has erased much of the downturn and sent things higher again.

It’s very inflationary.

To be clear, the battle with inflation is far from over… despite the headlines.

As I’ve said before, things like this rarely move in a straight line. Just as we saw in the 1970s, there are likely to be several more legs higher.

It’s why we need to remain patient and vigilant. We must stick to our strategy.

It’s working.

We’ll take our gains as we get them and prepare for more volatility ahead.

Our portfolio is strong and resilient. The market-beating gains from Whirlpool prove it.