Walmart & Target: A tell for what's to come?

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The markets continue to fall as rates rise, inflation compresses margins, and supply chain disruptions cause havoc. The tell was in Walmart and Target's earnings from this past week, lets dig in.

Today's Letter

• Market Update

• Trending Cryptos

• Top Meme Stocks

Market Update

After a short-lived bounce that gave many the hope of a bottom starting to form, the markets continued toward the next leg down. How far down can we continue to go? The earth's core is the limit.

Here's a look at some growth stock returns YTD, put together by a good follow on Twitter, Charlie Bilello.

We are !$%&ed. The drawdowns in growth stocks have not been dissimilar to the 2000 dot com bust and will go down in the history books. It's extremely difficult to say where we head next and the volatility is not our friend. Some important headlines that I'm watching closely are:

• Rise in commodity prices and where they go next. Wheat exports for a majority of the world have been shut down (Russia, Ukraine, India).

• There is an energy crisis with the price of gas skyrocketing.

• And inflation is starting to hit the retail consumer, as per Walmart and Target's recent earnings. I'll get into that briefly.

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Walmart and Target tumble on earnings - What does it mean?

Target (TGT) just saw it's second largest decline since "Black Monday" back in 1987. What's most interesting for myself to witness over the last 6 months is seeing these mega-cap stocks getting absolutely wrecked on bad news or poor earnings. What used to be the most stable of stocks (Walmart and Target) just experienced 25% drawdowns in a single day.

Why does this matter? Some of the largest retailers are seeing push-back from consumers after the rise in prices. Discretionary income is becoming less and less, especially after the average Joe spends $150 per week on gas. Pricing pressure is affecting these mega-corps and contracting margins by a meaningful amount.

• Compressed margins means companies will soon be increasing prices (yet again)

• Increased prices results in a higher inflation print

• Higher inflation = hawkish fed

And so markets have reacted with those expectations. Will this inflation actually be fixed by sharp rise in rates? We will see, but the way our global economies have previously co-existed in an efficient manner is close to gone and there is a long road ahead back to the norm

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