In Uncertain Times, Invest Where Consumers Are Going

There’s nothing shocking in admitting that consumer spending drives the economy. And with uncertain and inflation high, it’s also no surprise that consumers are trending with lower-cost goods and services, foregoing higher-end ones.

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  • That’s been somewhat apparent this earnings season, as high-end retailers have struggled more than big-box stores that cater to a cost-conscious clientele. With these companies now reporting earnings, there’s a sigh of relief as things haven’t been as bad as feared.

    The poster child for those fears has been Walmart (WMT). The company reported better-than-expected earnings. Plus, the retailer raised its future outlook, which provided some relief.

    Even with a post earnings rally, the stock is down about 12 percent over the past year. A further improvement in retail expectations could allow the company to expand faster. But as the ultimate retail defense play, if the economy continues to slow, Walmart will likely pick up more sales as a result.

    Action to take: Shares are a worthwhile investment for long-term investors during market down periods like today. The stock yields about 1.7 percent here, and the company has a history of raising its dividend over time.

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  • For traders, the January $150 calls, last going for about $3.35, offer a mid-double-digit return in the coming months. Traders may be able to buy slightly lower in the next few days, as shares may come down a bit from their post-earnings high.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.


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