Could the appetite-suppressing drug Ozempic pose a threat to snack food businesses? Financial writer Matt Levine humorously raised this question, highlighting the mixed feelings universal investors may have. The analysis of Ozempic’s impact on consumer spending is similar to the assessment of Taylor Swift’s record-breaking tour’s effect on the economy.
The determinants of total consumer spending have been studied for decades. Factors such as current income, expected future income, interest rates, wealth, and consumer preferences play a role in the allocation of total spending to different categories. Temporary changes in total spending may occur due to unforeseen events, but consumers quickly adjust.
With the model of consumer spending in mind, Ozempic may change the composition of total spending, but not the total itself. Consumers may allocate the money saved from consuming fewer snacks to other goods and services, creating competition among all products. For example, people may cut back on restaurant meals to afford luxury items like iPhones.
Similarly, Taylor Swift’s concert-goers likely spent more on tickets and travel but had to cut back on other purchases. Overall, while Ozempic may pose a threat to individual snack food companies, it does not significantly impact the entire economy. Well-diversified investors will benefit from whatever alternative spending consumers choose.
In conclusion, every product competes against every other product, and consumer spending patterns continuously evolve in response to changes in the market. Ultimately, Ozempic’s impact on consumer spending may affect specific industries but will not significantly disrupt the overall economy.
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