WMT Earnings and the Impending Selloff(🌈🐻 porn)

TLDR: WMT paints bleak picture of 2025, market goes down

Alright guys, I’ve got my FD’s locked and loaded. It’s not a huge play, only 3K worth, but they’re out the money and very short expiry. I think WMT is going to tank the market tomorrow. Walmart has historically been the “canary in the coal mine” when it comes to the US economy. Being the largest retailer, it gives a good snapshot into the overall health of the American consumer. Because of this, I think Walmart’s forecast tomorrow will be far bleaker than people are expecting, and the extremely out of touch stock market will get a reality check. Here’s why:

1. Consumers are tapped out. Debt is at an all time high. Delinquencies on credit cards and loans are at an all time high. You may say, “doesn’t this benefit Walmart since they are a discount retailer?” Absolutely, and we’ve seen Walmart killing it for the last year for this reason. Even higher income individuals have turned to Walmart to save money. But at some point, people just don’t have enough to spend on non-essentials. So while Walmart continues to do fairly well, every other business begins to struggle and we start to hear rumblings of the R word.

2. Slowing retail sales. We saw a 1% drop in sales in January when only a 0.2% drop was expected. Thats fairly significant, especially for the most important retailer in the US. Just another piece that says that people aren’t spending nearly as much.

3. Inflation. It’s back, and will get worse with the current administrations policies. You may say “wont that benefit businesses?”. Yes it can, but if no one has any more money to spend, it wont. Remember, during Covid everyone was saving money. We couldn’t spend on experiences like bowling and cruises and what not. Well over the past couple years, we HAVE been spending on experiences. A lot. And not many people have much money left to spend on anything else. So prices rising will mean greater costs for businesses, and they wont see the same spending patterns that they’ve been seeing since 2021.

4. Tariffs. This is a known, but we don’t know what they’re going to say about their forecast regarding tariffs. About 60-70% of Walmart’s goods are imported from China. Walmart accounts for 11% of ALL US imports from China. These tariffs absolutely will affect them in some fashion. Did they increase prices late last year to offset the cost? Are they planning to increase soon? We’ll find out. But one things is for sure: they will be increasing prices to strain an already overstrained consumer.

5. Higher rates for longer. I don’t think we will see a cut this year. We simply cannot. The new administration will fight tooth and nail for it, but i dont see Powell budging. Inflation will continue to rise as more workers are deported and business increase their prices to combat tariffs. Higher rates means M2 will continue to decline, reduced borrowing, and reduced spending.

6. Layoffs. Walmart has recently cut over a thousand jobs. This will probably be good thing for the company simply in terms of less costs, but they are one of many companies(Porsche, Salesforce, Workday, Amazon, Meta…) that have laid off a very significant number of employees recently. Again, good for the particular business, bad for the overall economy.

7. Valuation. Walmart has been on an insane tear all year. It has been absolutely killing earnings, and honestly i think they’ll kill this one. But their guidance will be much softer than analysts are expecting. Walmart’s P/E ratio is 42.88, that multiple will likely have to be reset if guidance is not stellar enough to justify the current stock price.

8. Astrology. For those that like crayons as much as i do, I’ve included a few charts. The main thing i want you to notice is the massive bearish divergences on WMT’s daily AND weekly charts, as well as SPY and QQQ(which looks like the weaker of the two). Volume on the indices has been non-existent as well. By market close today, 24 million shares of SPY had been traded(more were traded after market). I could only find 3 instances of the volume being that low since 2010. And it’s been like that for a few days.

All the signs of an impending recession are there, but the market has ignored everything so far. I’m betting 3K in FD’s that the market starts taking those warnings seriously tomorrow and into Friday. It is very likely I will lose this money, and that’s ok, it’s just for fun. But I’ll be very happy if I was able to put the pieces together and see this before it happens. If you made it this far, I appreciate you reading.