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What Walmart And Home Depot Said About The Economy
Nearly two years on from the last round of stimulus checks, the US consumer has held up better than feared.
Indeed, January's increase in nominal spending was the largest since... well, since the last round of stimulus checks.
We can debate what's behind resilient consumption. Maybe it's credit cards. Americans had nearly $1 trillion in plastic debt as of Q4. Maybe it's home equity. Americans tapped HELOCs aggressively late last year. Maybe it's savings buffers. The savings rate is now near re
The difference in WMT and HD reaction, I think, is because WMT is a consumer staple name, has some demand tailwinds (in food/consumables and trade-down) and persistent food price inflation is positive; this partially offsets weakness in other categories. HD is a consumer discretionary name, has all demand headwinds (both pro and DIY) and disinflation in many categories is a negative; there is little positive offset. Plus WMT looks fairly valued vs HD about 25% overvalued, to me.