The week ahead – Fed Minutes, UK May GDP, Jet2 results

1)  Fed minutes – 09/07 – are we starting to see the beginning of a break in consensus when it comes to the Fed board and the possible timing of the next rate cut? With all the noise coming from President Trump about Chairman Powell’s apparent shortcomings in cutting rates, it would appear that some Fed policymakers are on manoeuvres in relation to becoming Powell’s replacement when his term expires in May next year. In recent weeks we’ve heard from two Fed governors, Christopher Waller and Michelle Bowman suggesting that a July rate cut could be on the table. Waller’s comments came amidst concerns that hiring patterns have been slowing, and there has been evidence of that in the claims data which has been rising on both a weekly and a continuing basis. Bowman’s comments, made only days after the recent Fed meeting that left rates unchanged unanimously were also a surprise, given that the policy statement pointed to an expectation of higher inflation and lower economic growth in the months ahead. The accompanying dots also showed an expectation of 2 more rate cuts this year with September being the starting point for the first one. Seven Fed members out of the 19 members saw no further cuts this year with concerns over stagflation being the key takeaway. The shift in tone from both Waller and Bowman is even more notable for the fact that historically they haven’t been perceived as particularly dovish. That description more accurately describes Chicago Fed President Austan Goolsbee who has consistently burnished these credentials over the years and his recent comments would suggest that a July cut is probably too early, and that he would want to see more “benign” inflation reports before nudging rates lower. It will be interesting to see if this week’s minutes bear out the recent shifts from the likes of Waller and Bowman only days after the last Fed meeting, or whether they have seen an opening, and are merely looking to advance their credentials for when Powell leaves next year. Who says central bankers don’t indulge in political opportunism?  

2)  UK GDP (May) – 11/07 – having seen such a strong start to the year there was always the possibility that Q2 might presage a little bit of a slowdown, with April GDP expected to herald a pause. The reality was even more marked with April showing an even bigger slowdown of -0.3% as the various changes in tax thresholds and increases in national insurance contributions on the part of employers clobbered sentiment and weighed on spending. While decent wage growth is helping to offset some of the impact, recent data from the ONS showed that household disposable incomes fell by 1% in the first 3 months of this year, despite the economy growing by 0.7%. This is unlikely to improve in Q2 given the aforementioned increases in taxes and bills due in April, all of which were higher than headline inflation. Having seen the economy slow in April, can May offer hope of a rebound or will it be more of the same.

3)  JET2 FY 25 – 09/07 – after a disappointing start to the year, the shares slipped to 15-month lows in April, the shares have enjoyed a solid Q2. The Manchester based travel firm and airline saw its shares surge to a record high in June before retreating. In April the company reported that its 2025 full year results would be in line with expectations, as well as announcing a £250m share buyback. Jet2 said it expects group profits of between £565m and £570m, while announcing that summer bookings were up 8.3% year on year, with the new Bournemouth and Luton hubs adding 4% of that. On costs the company said that fuel was 95% hedged for the holiday season and 80% hedged over the full financial year. Interestingly there was little market reaction to the reluctance to provide any sort of guidance for 2026. Hopefully we’ll get more detail on that as well as further updates when it comes to its summer and winter bookings.

4)  Dr. Martens Q1 26 – 10/07 – has seen some solid gains since publishing its full year results a month ago. Last year saw a 10% fall in revenue for the year, and a sharp fall in profits, however this wasn’t unexpected. The shares gained on the back of a positive outlook which was more positive with improvements in the US, although EMEA was mixed. On guidance the company said it sees little impact from tariffs given its stock was already in the US, which means margins should remain strong. On full year revenue expectations for 2026, the higher pound could well impact revenues to the tune of £18m and PBT by £3m, although as far as profit guidance for 2026 is concerned that stays between £54m and £74m, a solid improvement from last year’s £34.1m. Was the early year optimism justified and will guidance need to be tweaked?

5)  Levi Strauss Q2 25 – 10/07 – the release of Levi Strauss Q1 numbers served to create a fair degree of volatility with the shares briefly slipping to their lowest levels in 5 years before rebounding strongly. Coming as they did just after the announcement of the various liberation day tariffs, that is understandable given how susceptible these sorts of fashion brands are to the imposition of tariffs on their products. The numbers themselves were broadly positive with revenues up 3% to $1.52bn, while profits came in ahead of forecasts at 38c a share. Direct to customer growth saw some decent gains, rising 12% while margins rose to 62.1%, an increase of 330bps. The company also maintained its full year guidance with an expectation of revenue growth of between 3.5|% and 4.5% and adjusted earnings of between $1.20 and $1.25 a share. On the question of tariffs there was an expectation that while there would be an impact the strength of the brand would allow these to be mitigated to some extent by the ability to increase prices, along with a robust supply chain.