Why Barbie and Taylor Swift actually matter to the 2023 economic story
'Barbie' and Taylor Swift are driving consumers' experiential spending: Expert
Josh Schafer
·Reporter
Mon, July 31, 2023
It's a Barbie girl summer for economists, too.
Mattel's (MAT) famous doll has been everywhere this summer, dominating the box office with the best opening weekend of 2023 and even getting a mention in the Federal Reserve's latest press conference.
But the story of Barbie's intersection with finance news is about more than the industry's most prominent purple-tied official Jay Powell answering a question about pink attire and Taylor Swift's Eras Tour, because both are proving to be legitimate drivers of a resilient US consumer keeping America out of a recession.
"These events are getting more highlighted specifically because of the situation we're looking at," Bank of America US economist Shruti Mishra told Yahoo Finance.
"Is the consumer going to drop? Is it still resilient? Those questions are the most important questions leading up to any Fed press conference, FOMC meeting, and just generally for the economic outlook."
Fed Chair Powell, for his part, didn't fully bite last week when asked about the impact of Barbie and Taylor Swift on the US economy. But even he noted it doesn't hurt.
"The overall resilience of the economy, the fact that we've been able to achieve disinflation so far without any meaningful negative impact on the labor market, the strength of the economy overall, that's a good thing," Powell said.
"It's good to see that, of course. It's also you see consumer confidence coming up and things like that, that will support activity going forward."
Margot Robbie attends the European premiere of "Barbie" in London, Britain July 12, 2023. (Maja Smiejkowska/REUTERS)
And these aren't just any popular summer events, either.
Reports have estimated Swift's Eras Tour could be the first billion-dollar concert tour ever.
Meanwhile, "Barbenheimer" — the dual box office hits of "Barbie" and Christopher Nolan's biopic "Oppenheimer" — combined for the fourth-biggest overall weekend in box office history.
In the latest release of the Fed's Beige Book, the Philadelphia Fed highlighted Taylor Swift's three-night stop at Lincoln Financial Field as a boost to the local economy.
Taylor Swift performs onstage during the Taylor Swift | The Eras Tour at Lincoln Financial Field on May 12, 2023 in Philadelphia, Pennsylvania.
(Lisa Lake/TAS23/Getty Images for TAS Rights Management)
"Multiple contacts reported that the amount of money guests spend at their leisure destinations declined modestly in recent months," the report read.
"Despite the slowing recovery in tourism in the region overall, one contact highlighted that May was the strongest month for hotel revenue in Philadelphia since the onset of the pandemic, in large part due to an influx of guests for the Taylor Swift concerts in the city."
Analysis from Moody's shows Swift's impact wasn't just a one-off in Philadelphia, either.
Moody's had seen an increase in revenue per available room in every city Swift has stopped in that the firm tracks through its report's publication July 21.
"Multiple contacts reported that the amount of money guests spend at their leisure destinations declined modestly in recent months," the report read.
"Despite the slowing recovery in tourism in the region overall, one contact highlighted that May was the strongest month for hotel revenue in Philadelphia since the onset of the pandemic, in large part due to an influx of guests for the Taylor Swift concerts in the city."
Analysis from Moody's shows Swift's impact wasn't just a one-off in Philadelphia, either.
Moody's had seen an increase in revenue per available room in every city Swift has stopped in that the firm tracks through its report's publication July 21.
Moody's tracked average revenue per room increases at all four of the cities Taylor Swift stopped at in May.
According to University of Michigan clinical assistant professor of marketing Marcus Collins, it's rare for a movie and concert tour to have this kind of impact.
With Barbie pink taking over wardrobes and Swift's Eras Tour bracelets dominating social media, the marketing behind both messages have transcended into a cultural moment. And culture, Collins told Yahoo Finance, is the "most influential external force of human behavior, full stop."
"The salience of (Barbie and the Eras Tour) makes it so that it's undeniable," Collins said. "You can't not talk about it because it's everywhere."
Jefferies US economist Thomas Simons told Yahoo Finance he hasn't seen anything like the obsession with Barbie and Taylor Swift in his more than 15 years working in economic research.
'Barbie,' Taylor Swift, & the Fed: Powell talks consumer spending & inflation
From moviegoers dressing in pink to see the Barbie movie to Taylor Swift fans shelling out big bucks to see her "Eras" tour, consumers are still spending on big events. Both pop culture phenoms were referenced in a question to Federal Reserve Chair Jerome Powell about consumer spending and economic growth. Powell said "it's good to see" the economy remain resilient despite the Fed raising rates, but he notes they will be watching to make sure that economic strength doesn't lead to inflation rising again. Powell did not say whether or not he has seen Barbie or the "Eras" tour.
Simons likens the interest from economists to the rise of social media and the "casualization" of economics, which leads to economists being both more aware of pop culture impacts and more willing to look for them.
And as economists and researchers alike have turned to the data to look for the impact of these cultural phenomena, the answers have been eye-popping.
In addition to the findings from Moody's and the Fed, recent data from Bank of America showed card spending on entertainment and clothing both spiked the week of Barbie's release with entertainment sales up about 13%.
"There's (likely) a Barbie and Oppenheimer effect to play out here," Mishra noted.
Bank of America saw an increase in card spending the week Barbie and Oppenheimer were released.
Josh Schafer is a reporter for Yahoo Finance.
In the Market: Signs of life in the moribund US deals market
Mon, July 31, 2023
By Paritosh Bansal
(Reuters) - Singapore's sovereign wealth fund Temasek invested the smallest amount since 2019 during its last fiscal year, as it waited for when pricing got more to its liking. Now, it's starting to see what it likes.
The S$382 billion ($287 billion) fund is seeing more investment opportunities. It invested in payment processor Stripe in March after passing on earlier fundraising rounds due to high valuation, said Jane Atherton, Temasek's joint head for North America.
Temasek is also seeing deals at reasonable valuations, adjusted for risks, to invest alongside private equity firms in buyouts, as well as to buy assets from them, she said.
"We have been somewhat cautious in terms of the pace of our deployment," Atherton said. "I would say we're getting less cautious as we continue through the year."
Temasek's evolving view reflects a change that is becoming more apparent in some parts of the U.S. deals market in recent weeks: the gap between the price expectations of buyers and sellers -- a key reason behind what has been a moribund year of deals -- is closing, according to half a dozen private equity investors and deal advisers.
Buoyed by a recent market rally driven by technology and other growth stocks and the U.S. economy's surprising resilience in the face of rate rises, buyers are becoming more confident than they were just weeks ago. Some are starting to think they can afford to pay more because they expect to increase the profits of companies they buy.
At the same time, some sellers, particularly listed companies, have come to realize that if their value didn't move up much in this year's stock market rally, the prices that they had seen at the highs in 2021 might not come back.
Peter Orszag, Lazard's incoming CEO, said sellers were coming around to the view that the impact of the higher rate environment on valuations may be "a new normal, as opposed to a very temporary blip" that they can wait out.
"As you move through time, the realization that this is the reasonable baseline becomes more potent, and that's what's narrowing the gap," Orszag said.
Among areas that could see increased activity are sectors such as healthcare, energy transition and technology. Private equity sales of the best portfolio companies and structured investments are becoming more active, too, the investors said.
One tech-focused investor, whose pipeline of deal opportunities is just about 20% of what it was two years ago, said the valuation convergence is leading to more talks. They added they expected to see a more pronounced pickup after Labor Day when people return from the summer holidays.
NASCENT RECOVERY
For banks, investors and companies, the change in sentiment, should it stick, is good news. Lower investment banking revenues dragged down profits at banks including Goldman Sachs and Morgan Stanley. Earlier this month investors latched onto any signs of hope, with comments from bank executives suggesting a recovery was afoot.
Any recovery, however, is tentative and the narrowing of the gap in expectations is not uniform across the market. Much uncertainty remains, including whether there is now too much optimism in the market.
"We're at the very nascent stages of this," said Jason Thomas, head of global research and investment strategy at Carlyle. "Perhaps this will fizzle out."
For now, the market dynamic is putting some valuations back within historical norms after the wild pandemic-era gyrations, creating conditions for buyers and sellers to meet.
In the software sector, for example, firms historically traded around 6 times forward revenue. During the pandemic rally, the multiples expanded to as high as 17 times, before dropping to 5 times last year, the tech-focused investor said.
Those multiples have now traded back up above 6 times, allowing deals to happen that would not have at the end of last year, two of the investors said.
In late June, for example, IBM bought software maker Apptio for $4.6 billion from Vista Equity Partners, paying more than 10 times forward revenue.
HIGHER RATES
The idea that the economy might be in for a period of higher inflation and interest rates is also playing into the calculus.
A deal that used to cost 6.5% a year to finance at the end of 2021, now costs 11% to 12%, according to Carlyle's Thomas. That means for a buyer to get a 20% annual return on the deal, the company's earnings would need to grow at 16% now versus 9% in 2021.
S&P 500 earnings, excluding the energy sector, are estimated to grow 7% in the third quarter, according to Refinitiv. With the economy looking in better shape, more buyers may feel they can meet higher growth targets, Thomas said.
When they can't agree on price, the two sides are exploring more creative ways to get along.
A company facing increased interest costs, for example, might want to replace part of its debt with other instruments that don't require interest payments, such as warrants and payment-in-kind notes, Thomas said.
Temasek is seeing more demand for such structured investments, Atherton said, with its Credit and Hybrid Solutions unit deploying when "people aren't yet willing to move to what we view as fair value on price, but we like the asset."
($1 = 1.3306 Singapore dollars)
(Reporting by Paritosh Bansal; Additional reporting by Greg Roumeliotis; Editing by Anna Driver)
Mon, July 31, 2023
By Paritosh Bansal
(Reuters) - Singapore's sovereign wealth fund Temasek invested the smallest amount since 2019 during its last fiscal year, as it waited for when pricing got more to its liking. Now, it's starting to see what it likes.
The S$382 billion ($287 billion) fund is seeing more investment opportunities. It invested in payment processor Stripe in March after passing on earlier fundraising rounds due to high valuation, said Jane Atherton, Temasek's joint head for North America.
Temasek is also seeing deals at reasonable valuations, adjusted for risks, to invest alongside private equity firms in buyouts, as well as to buy assets from them, she said.
"We have been somewhat cautious in terms of the pace of our deployment," Atherton said. "I would say we're getting less cautious as we continue through the year."
Temasek's evolving view reflects a change that is becoming more apparent in some parts of the U.S. deals market in recent weeks: the gap between the price expectations of buyers and sellers -- a key reason behind what has been a moribund year of deals -- is closing, according to half a dozen private equity investors and deal advisers.
Buoyed by a recent market rally driven by technology and other growth stocks and the U.S. economy's surprising resilience in the face of rate rises, buyers are becoming more confident than they were just weeks ago. Some are starting to think they can afford to pay more because they expect to increase the profits of companies they buy.
At the same time, some sellers, particularly listed companies, have come to realize that if their value didn't move up much in this year's stock market rally, the prices that they had seen at the highs in 2021 might not come back.
Peter Orszag, Lazard's incoming CEO, said sellers were coming around to the view that the impact of the higher rate environment on valuations may be "a new normal, as opposed to a very temporary blip" that they can wait out.
"As you move through time, the realization that this is the reasonable baseline becomes more potent, and that's what's narrowing the gap," Orszag said.
Among areas that could see increased activity are sectors such as healthcare, energy transition and technology. Private equity sales of the best portfolio companies and structured investments are becoming more active, too, the investors said.
One tech-focused investor, whose pipeline of deal opportunities is just about 20% of what it was two years ago, said the valuation convergence is leading to more talks. They added they expected to see a more pronounced pickup after Labor Day when people return from the summer holidays.
NASCENT RECOVERY
For banks, investors and companies, the change in sentiment, should it stick, is good news. Lower investment banking revenues dragged down profits at banks including Goldman Sachs and Morgan Stanley. Earlier this month investors latched onto any signs of hope, with comments from bank executives suggesting a recovery was afoot.
Any recovery, however, is tentative and the narrowing of the gap in expectations is not uniform across the market. Much uncertainty remains, including whether there is now too much optimism in the market.
"We're at the very nascent stages of this," said Jason Thomas, head of global research and investment strategy at Carlyle. "Perhaps this will fizzle out."
For now, the market dynamic is putting some valuations back within historical norms after the wild pandemic-era gyrations, creating conditions for buyers and sellers to meet.
In the software sector, for example, firms historically traded around 6 times forward revenue. During the pandemic rally, the multiples expanded to as high as 17 times, before dropping to 5 times last year, the tech-focused investor said.
Those multiples have now traded back up above 6 times, allowing deals to happen that would not have at the end of last year, two of the investors said.
In late June, for example, IBM bought software maker Apptio for $4.6 billion from Vista Equity Partners, paying more than 10 times forward revenue.
HIGHER RATES
The idea that the economy might be in for a period of higher inflation and interest rates is also playing into the calculus.
A deal that used to cost 6.5% a year to finance at the end of 2021, now costs 11% to 12%, according to Carlyle's Thomas. That means for a buyer to get a 20% annual return on the deal, the company's earnings would need to grow at 16% now versus 9% in 2021.
S&P 500 earnings, excluding the energy sector, are estimated to grow 7% in the third quarter, according to Refinitiv. With the economy looking in better shape, more buyers may feel they can meet higher growth targets, Thomas said.
When they can't agree on price, the two sides are exploring more creative ways to get along.
A company facing increased interest costs, for example, might want to replace part of its debt with other instruments that don't require interest payments, such as warrants and payment-in-kind notes, Thomas said.
Temasek is seeing more demand for such structured investments, Atherton said, with its Credit and Hybrid Solutions unit deploying when "people aren't yet willing to move to what we view as fair value on price, but we like the asset."
($1 = 1.3306 Singapore dollars)
(Reporting by Paritosh Bansal; Additional reporting by Greg Roumeliotis; Editing by Anna Driver)
