Julia Coronado 1.0 13 ideas

Coronado notes that while consumers ignore modest gas hikes, "if it is big and sustained, they start getting more cautious on other kinds of spending." We have a "double whammy" for the consumer: rising unemployment (-92k jobs) and the highest gas prices of the Trump presidency. This destroys discretionary income. The "wealth effect" that supported spending in 2025 is evaporating. AVOID Consumer Discretionary and Retail. If the government issues massive stimulus checks or tax refunds (mentioned as a possibility) to offset energy costs, spending could remain resilient.

"The consumer is slower, the jobs market is slower. But there's no signs that things are really kind of spiraling out of control." The economy is undergoing a "step down" in growth rather than a collapse. The slowing data is consistent with structural constraints (labor supply) rather than a demand crisis. Maintain exposure but expect lower growth rates; do not position for a hard landing/crash. If the "slower" trend accelerates into actual job losses rather than just low hiring, the soft landing thesis fails.

"The unemployment rate... has actually ticked lower... [Inflation] is going to be about 3%... You're really going to be looking at the second half of the year before they could see the kinds of easing... maybe once or twice." The market or specific investors (like Einhorn) expecting "a whole bunch" of cuts are misinterpreting the low job growth numbers. The Fed sees this as structural (demographics), not cyclical weakness, and will keep rates steady to fight sticky inflation and tariff effects. Fade aggressive rate cut bets. Yields are unlikely to plummet in the short term. A sudden spike in unemployment or economic "spiraling" would force the Fed's hand.

"We've got the AI tailwinds on investment." While the consumer and broader jobs market are slowing, corporate capital expenditure on Artificial Intelligence remains a robust pillar supporting the economy, preventing a recessionary spiral. Long AI infrastructure and investment themes as the primary growth engine in a slowing macro environment. Overinvestment or lack of ROI in AI projects could remove this economic prop.

While the consumer struggles, Coronado observes that "the stock market and anything tied to AI is, you know, everything's coming up roses." This highlights the "K-Shaped" economy. Capital expenditure on AI infrastructure is decoupled from the average consumer's wallet. Investors should remain long the winners of the "K" (AI/Tech) while avoiding the losers (Consumer Cyclicals). LONG AI beneficiaries as they are insulated from the labor market "bleed" affecting the broader economy. Valuation compression if the broader economic slowdown eventually impacts enterprise tech spending.

Coronado states the "average consumer is not doing so great" and that wage growth has "grinded lower to where it's barely beating inflation." Consumer Discretionary stocks (XLY) rely on excess disposable income. With the labor market in a "slow bleed" and wages stagnating, discretionary spending is the first to be cut. SHORT the consumer discretionary sector to play the "lower leg" of the K-shaped economy. A "soft landing" where inflation drops faster than wages, suddenly boosting real purchasing power.

Coronado forecasts an "upward drift in the unemployment rate" and states this data supports a baseline of "another cut or two as the year unfolds." Bond prices are inversely correlated to interest rates. If the labor market weakens ("slow bleed") and the Fed cuts rates to support employment, yields will fall, causing long-duration Treasuries (TLT) to rally. LONG bonds as a hedge against the deteriorating labor market. Inflation re-accelerating, preventing the Fed from cutting despite labor weakness (Stagflation).

Coronado notes that "auto sales... went down quite a bit in the fourth quarter" and automakers are modeling a "pretty price sensitive, budget conscious consumer in 2026." The automotive sector is highly cyclical and sensitive to consumer credit and income. If wage growth is "barely beating inflation" and sales are already dropping, legacy automakers face margin compression and inventory build-ups. SHORT mass-market automakers exposed to the weakening average consumer. Unexpected drop in financing rates stimulating demand; government subsidies for auto purchases.