Mark Montgomery’s Post

On the economic front, which is my second major interest, it's been a fascinating couple of weeks. Stock market investors are celebrating lower inflation despite the very well understood and frankly planned reason for it, which is demand destruction. Inflation has been surprising on the downside -- though core inflation is still about 4%, because the economy is slowing more rapidly than expected (celebrate...). I've gained a fair amount of respect for Doug McMillon over the years, particularly with regard to success in grocery, pivot on e-commerce driven by Amazon threat, and healthcare strategy. (Another CEO who has been on our distribution list for EAI for many years). My interpretation is twofold. One is he's sending a not so soft message to the Fed that Walmart wouldn't be terribly disappointed if they eased a bit in coming months (deflation is a warning to the Fed), and secondarily he's sending a message to investors that it might get ugly in price wars over the next few months, and of course as the largest retailer and grocer, Walmart is positioned well to benefit. Bottom line is Walmart is one of the best ways to track the health of the American consumer. In recent years they've been moving up in demographics and capturing more market share in the middle income group as well, but still among the best ways to take the pulse of the American consumer, which is by far the biggest driver in the largest #economy in the world. What's happening appears to be precisely what I and others expected. A sharp slowdown in GDP in the 4th quarter and light to moderate recession in first half of 2024. Whether it will be two consecutive quarters of negative growth or not, we'll have to see, but I would not be surprised to see the U.S. economy bouncing above and below zero GDP in 2024. Despite the mention of deflation by Doug--and I believe him, I think this is only the beginning of the end of the first wave of inflation. The second wave, which tends to be more problematic, usually begins a few months to over a year after the Fed begins to loosen money supply. If memory serves, there has only been one inflationary spike in the past century that didn't result in a second wave, and the closest era to the current in the 1970s experienced several waves during the decade of stagflation. The 2024 election will be critical at this point in U.S. history given the situation. For the sake of the U.S. and world, I am hoping for a younger (under 70 😀), moderate POTUS who is fiscally disciplined, can unify the country, and get things done with Congress.