NAOS CEO Insights

CEO INSIGHTS – Week Ending 8 November 2019 By NAOS Asset Management

November 8, 2019

“We continue to believe that upward trajectory is an inevitable consequence of the shift in consumer spending habits from spending their money on material possessions to wanting experiences.” Richard Fain, CEO, Royal Caribbean Cruises

CEO INSIGHTS – Week Ending 8 November 2019 By NAOS Asset Management

“We continue to believe that upward trajectory is an inevitable consequence of the shift in consumer spending habits from spending their money on material possessions to wanting experiences.” Richard Fain, CEO, Royal Caribbean Cruises


As part of the NAOS investment process, we pay particular attention to the comments made by company CEOs and business leaders in order to gain a greater understanding of the current investment environment and key trends that may be emerging. Below are quotes from the week which in our view detail some of the most important and prominent industry trends and economic factors impacting their businesses.  
 
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Global Consumer

“Consumer spending [in the US] remains relatively strong with some moderation versus 2018.” Ajay Banga, CEO MasterCard

“We continue to believe that upward trajectory is an inevitable consequence of the shift in consumer spending habits from spending their money on material possessions to wanting experiences.” Richard Fain, CEO, Royal Caribbean Cruises

“What I can tell you is our forward bookings and the demand for air travel is as strong as we've ever seen. We've seen that as consumers move more to experience based expenditures from objects there are more and more people spending more of their money on air travel.” Doug Parker, Chairman and CEO, American Airlines

“The general update is that the US consumer is doing fine. Everyone was so pessimistic in August, but what we saw in our consumer data was actually an acceleration in consumer activity in 2019.” Brian Moynihan, CEO, Bank of America Merrill Lynch

Environmental, Social and Governance (ESG)

“Just anecdotally, I was in the IMF meetings in Washington a couple of weeks ago and every single meeting that I had, we talked about ESG. I know that’s anecdotal, but it’s a really booming area.” Douglas L. Peterson, CEO, S&P Global

“Something to keep an eye on is ESG this has become a factor, which is very important in Europe in investors’ minds. It is increasingly becoming more pervasive in the U.S., obviously, we’re seeing it in our asset management business, and you can see the investments we’ve made there. I think increasingly, this is becoming a topic for boardroom discussions.”  Kenneth Jacobs, CEO, Lazard

Building and Construction

“We are seeing some recent improvement in some of the traditional lead indicators, such as low interest rates and increased credit availability. However, as we have seen over the last year, this has not yet translated into an improvement in building approvals and commencements.” Julie Coates, CEO, CSR

“The construction sector continues to contract and consumer spending will be held back by low wages growth. We are, however, expecting some stimulus from tax cuts and low rates, although the impact will be limited by continued softness in the labor market.” Brian Hartzer, CEO, Westpac

Domestic Property

“On the housing market, we expect reported sale prices to continue to recover, as new supply slows and investors return to the market. This effect will be strongest in Sydney and Melbourne, although in absolute volume terms, the improvement is likely to be modest.” Brian Hartzer, CEO, Westpac

Infrastructure

“In Boral Australia, we expect several major projects to ramp up in the second half, including Queens Wharf and Westgate Tunnel projects.” Mike Kane, CEO, Boral

Health Insurance

“We have experienced higher than expect claims. Claims growth was 2.4% versus the 2% reported at the full year. This indicates a trend and we now expect the increase to continue throughout FY20. These higher claims have been driven by a number of factors, predominately as a result of higher private hospital payments, which reflects an increase in the average benefit size along with the continuation of elevated prosthesis costs.” Market Statement, Medibank Private

“We are being pushed and we are trying to do the best work we can around affordability and make premiums as affordable as we can, but we can’t do that if the [medical device] costs that we don’t directly control, we influence but we don’t directly control, are growing at 10 per cent.” Craig Drummond, CEO, Medibank Private

Domestic Economy

“Financial results are down significantly in a challenging, low-growth, low interest rate environment.” Brian Hartzer, CEO, Westpac

“We see slowing GDP growth [to] ~2% in 2020.” Market Statement, NAB

“Business conditions and confidence have weakened which may dampen FY20 business credit growth.” Market Statement, NAB

Superannuation

“In 1991 there were 241 credit unions and building societies. Two years ago, APRA recorded just 58 of these entities. It’s a scale of change that could be mirrored in the super industry as high returns are not the only measure of success in super anymore. Mergers have the potential to deliver efficiency wins for industry and improve member outcomes.” Anna Shelley, CIO, Catholic Super and Equipsuper

Automotive

“The slowdown in the momentum of the automotive industry has been both more intense and widespread than originally expected, even though the new emissions test that was introduced in September of this year did not trigger the distortions seen a year ago.” Voestalpine Market Statement (Austrian steelmaker)

 

 

 
Important information: This material has been prepared by NAOS Asset Management Limited (ABN 23 107 624 126, AFSL 273529) (NAOS) for general information purposes only and must not be construed as investment advice. Certain economic, market or company information contained in this material may have been obtained from published sources prepared by third parties. Nothing contained herein should be construed as granting by implication or otherwise, any license or right to use such third party content without the written permission of the owner.