You can buy anything you need here, maybe even an accurate signal of economic recession. On this point, investors may be reaping a new economic indicator, as many trusted indicators have not been confirmed in recent years. From the inverted yield curve to the Conference Board's major economic indicators of the world's largest enterprises, to the rapid rise in interest rates in 2022 and 2023. The problem is that economic soft landing (which seems to have been factored into stock prices at the moment) often appears at first glance like an economic recession, as both phenomena can manifest as weak economic data. Investors who wrongly believe that a recession is imminent often become too conservative and miss out on profits. For example, anyone who withdraws funds from the market due to the S&P 500 index falling in April will miss the gains in the first half of May and June.$Walmart (WMT.US)$Jim Paulsen, chief investment strategist at Paulsen Perspectives, pointed out that this is where Walmart comes in handy. It focuses on those shoppers who value common sense and lets management know the financial health of consumers, especially those with less money, who often feel the pain of an economic recession first. Paulsen said the index can also provide more information to observers of economic recessions. He compared Walmart's stock price with the S&P Global Luxury Index to capture the trend of consumers turning to Walmart when the economy slows down and the risk of recession increases, rather than buying more expensive goods. He called this indicator the Walmart Recession Signal.

You can buy anything you need here, maybe even an accurate signal of economic recession. On this point, investors may be reaping a new economic indicator, as many trusted indicators have not been confirmed in recent years. From the inverted yield curve to the Conference Board's major economic indicators of the world's largest enterprises, to the rapid rise in interest rates in 2022 and 2023.

The problem is that economic soft landing (which seems to have been factored into stock prices at the moment) often appears at first glance like an economic recession, as both phenomena can manifest as weak economic data. Investors who wrongly believe that a recession is imminent often become too conservative and miss out on profits.

For example, anyone who withdraws funds from the market due to the S&P 500 index falling in April will miss the gains in the first half of May and June.

Jim Paulsen, chief investment strategist at Paulsen Perspectives, pointed out that this is where Walmart comes in handy. It focuses on those shoppers who value common sense and lets management know the financial health of consumers, especially those with less money, who often feel the pain of an economic recession first.

Paulsen compared Walmart's stock price with the S&P Global Luxury Index to capture the trend of consumers turning to Walmart when the economy slows down and the risk of recession increases, rather than buying more expensive goods. He called this indicator the Walmart Recession Signal.

Paulsen compared the Walmart Recession Signal that rises with economic deterioration with the widening of the corporate credit spread. He found that since 2007, the changes in the two have been nearly synchronous. This is not surprising, as the credit spread (the difference in yields between corporate bonds and US Treasuries) often widens as recession risks increase.

Interestingly, the Walmart Recession Signal and the credit spread sent different signals.

Although both indicators predicted the financial crisis in 2007, the Walmart Recession Signal remained flat in 2015 and 2016, while the widening credit spread pointed to an impending economic recession. In the second half of 2019, the Walmart Recession Signal was once again proven to be correct, even though the credit spread did not appear, this indicator still sounded the recession warning.

So what about today? Paulsen pointed out that the credit spread has been tightening all year round, indicating no actual financial pressure and a good economic situation. However, the Walmart Recession Signal has risen to its highest level since 2020 recession.

In the last two times, the Walmart Recession Signal was correct while the credit spread was wrong. Will this rule be proven for the third time?

Paulsen stated that given the short history of the Walmart Recession Signal and that other indicators also show that the economy is still on a relatively healthy basis, he is unsure how much weight should be given to the indicator. He wrote: "Strong balance sheets, abundant liquidity, although employment growth has slowed down, it is still positive, real wages and profits continue to rise," "My guess is that the Walmart Recession Signal points to a soft landing, but investors may wish to further consider recession risks if the index continues to rise."

At least Walmart investors are winners. Thanks to the company's strong first-quarter performance report and annual shareholders' meeting, the company's stock price has reached a record high. The annual shareholders' meeting emphasized the company's technology-oriented strategy and market returns. Since Barron's recommended the company last July, its stock price has risen nearly 18%, leaving many peers behind.

At least the US economy is not slowing down yet.

Edited by Jeffrey