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Growth Team Weekly Investment Insights

In this week's post, we discuss the Fed's recent policy meeting, signs of consumer weakness, the outsized outperformance of non-US equities in 2025 and how Formula One hopes Brad Pitt will drive increased popularity and monetization of the sport.

Starting at a high level, the US Federal Reserve held rates steady at its most recent meeting and updated its economic projections. The Fed lowered its 2025 economic growth forecast to 1.7% (from 2.1% in December), increased its inflation forecast to 2.7% (from 2.5%) and increased its unemployment projection to 4.4% (from 4.3%). And last, the projected Fed Funds rate remained unchanged at 3.9%.

The Fed’s Latest Summary of Economic Projections

 

 

 

 

 

 

 

 

 

 

 

Also released was the February retail sales data, which was better than the dismal January reading but lagged expectations.

 

 

Particularly concerning was the fall in spending at restaurants and bars—an area economists point to as particularly discretionary since customers can easily adjust how much they spend on eating out.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Fed’s lower GDP growth expectations and weaker-than-expected retail sales data were consistent with falling consumer confidence data from the University of Michigan. The consumer sentiment index fell to a preliminary reading of 57.9 in March, the third consecutive monthly drop and the lowest reading since November 2022.

 

 

 

 

 

 

 

 

 

 

 

 

 

The survey data also displayed an increase in one-year ahead inflation expectations to 4.9% (the highest level since November 2022). And longer-term inflation expectations leaped to 3.9% from 3.5%, the highest level since 1993, according to Bloomberg data.

This article from the Financial Times also outlines some other quantitative indicators of consumer weakness, including:

• Footfall (the number of people who visit a physical store) to US stores fell 4.3% year on year in early March, according to RetailNext.
• Placer.ai, which aggregates signals from consumers’ mobile devices, has recorded fewer visits to big-box stores, including Walmart, Target and Best Buy, in recent weeks.
• Sales of discretionary general merchandise fell by 3% in the week ending March 8 compared with last year, according to data from Circana.
• Traffic to US fast-food restaurants was down 2.8% in February, according to Revenue Management Solutions, with visits at breakfast time dropping by double digits. “It’s the easiest meal to make at home or skip entirely,” the consultancy said.

This weakened sentiment has shown up in equity returns. Within the Russell 1000® Index, the consumer discretionary sector has underperformed the consumer staples sector by 15 percentage points so far in 2025.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-US Continues to Outperform

The MSCI ACWI ex USA Index’s outperformance against the Russell 1000® Index over the past 60 business days (roughly three months) is approaching the best levels of the last 10 years.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The top two contributing countries so far this year for the MSCI AC World Index are Germany and China, which are both benefitting from the prospect of government stimulus measures.

German markets rose after the Bundestag (the lower house of parliament) approved a constitutional amendment to allow more debt-financed defense, infrastructure and climate spending. The package establishes a €500 billion infrastructure fund over the next 12 years, including €100 billion in climate-related spending.

Amazingly, despite the dominance of US mega-cap technology in this bull market, the MSCI Germany Index is now outperforming the Russell 1000® Index since the beginning of 2023.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sentiment further improved in China after news broke that the government will “vigorously boost consumption” and “expand domestic demand in all directions”, according to Xinhua, China’s state news agency.

The new consumption plan includes pledges to increase the minimum wage, strengthen support for education and establish a subsidy system for childcare, which is a pressing issue as China’s population has declined for three consecutive years. The new package will also promote “inbound” consumption. Beijing has extended visa-free travel to dozens of countries in the past year in an effort to revive foreign tourism after the pandemic.

Are Small Caps a Tariff Risk Hedge?

Tariff uncertainty continues to drive market volatility. One way to diversify tariff risk may be to look at smaller, more domestically focused companies. Using FactSet’s Geographic Revenue tool, you can see non-US revenue exposures. Russell 2000® Index constituents generate 24% of their sales outside the US versus 44% among the Russell Top 200® Index members.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Formula One Hopes Brad Pitt Movie Will Boost Value of Media Rights

The owner of Formula 1 is hoping a new film starring Hollywood star Brad Pitt will boost the sport’s Netflix-driven push into the American public mainstream. The film is part of a strategy to use show business to widen the sport’s appeal beyond its traditionally strong European market.

It comes as F1 seeks to use its newfound popularity to improve on a current US broadcast deal that nets it roughly $85 million per year from Disney’s ESPN. ESPN has held the US rights since 2018 but its window of exclusivity to renegotiate a new deal has elapsed, freeing Liberty to speak to other broadcasters. The next US deal could be worth $121 million, according to analysts at Citi, who added that Netflix, Amazon and Apple would be “the most likely bidders.”

The company, which has owned F1 since an $8 billion takeover in 2017, has transformed the sport by marketing it in new ways, helping it to win new fans with the 2019 release of the Netflix show “Formula 1: Drive to Survive.” The series paved the way for F1 to expand in the US, adding races in Miami and Las Vegas in 2022 and 2023. The average number of viewers watching races on ESPN doubled to 1.1 million in 2024 compared with 2018, although that was flat compared with the previous year.

To read more about our thoughts on Formula One, we recently released a paper titled “Media Sector Spotlight: Pit Stops and Playlists,” which can be found on our website.  

The Artisan Growth Team manages portfolios that hold securities issued by Liberty Media Formula One as of 12/31/24.  Portfolio securities are subject to change.