By Graham Summers, MBA | Chief Market Strategist
One of our proprietary measures for the economy is signaling a recession is at hand.
That measure is the Target (TGT): Walmart (WMT) ratio.
Target and Walmart are big box retailers with distinctively different brands/ price points. Target tends to be more consumer discretionary-oriented while Walmart tends to be more consumer staple-centric.
As a result of this, comparing the performance of the two companies’ stocks is a handy way of seeing if consumers are spending more money on discretionary items or if they are cutting back and focusing on lower price goods/ staples.
Put simply, when the TGT:WMT ratio rises, the consumer is strong. And when it collapses, it usually signals that an economic contraction is underway.
See for yourself. This ratio collapsed during the recession of 1990-1992, the Tech Crash/ recession, the Great Financial Crisis and the “close-call” of 2016-2017.
So what is this metric showing us today?
Hint: it’s UGLY.
Sure, this might be a fluke… but given the accuracy of this measure over the last 40 years, I wouldn’t bet on it. Indeed, my proprietary Crash trigger is on the verge of registering a “SELL” for the first time in four years.
This signal went off before the 1987 Crash, the Tech Crash, and even the Great Financial Crisis. And right now, it’s flashing its first MAJOR warning sign in years.
To find out about this trigger, and what it’s saying about stocks today…
Graham Summers, MBA
Chief Market Strategist
Phoenix Capital Research
