Walmart Bottoms Relative to S&P 500

This chart shows three things. First, the candles show how Walmart performs relative to the broader market (S&P 500 ETF - SPY). Second, it shows how that ratio changes as the unemployment rate goes up (light blue line). Third, it shows the 25-year support line of Walmart's relative performance to SPY (red line).

Notice how Walmart's relative performance goes down as the unemployment rate goes down, and goes up as the unemployment rate goes up. Walmart typically fares relatively better during economic downturns presumably because more people seek out bargain prices.

Also notice that, following its inflation warning, Walmart's performance relative to SPY is near its 25-year support line. One could reasonably argue a couple of things: (1) We are possibly near a bottom in terms of Walmart's underperformance to the S&P 500, and (2) If this correlation is predictive, the unemployment rate may soon start to rise.

Just remember that this is a relative chart, so it does not mean that the price of Walmart's stock will go up from here. It just means that Walmart may soon begin to shift from underperforming the broader market to outperforming (if the stock market is falling, then Walmart may fall too but by a lesser magnitude). This shift can take weeks to months, but once underway, can last for years.

While I am not providing financial advice, and encourage everyone to fully analyze the risks of their own trades, I am considering adding Walmart to my portfolio as a form of recession hedging. I am waiting for the possibility of Walmart to fall as much as 10% more in terms of its relative performance to the broader market (SPY), once it consolidates there I will likely begin accumulation. To read more about why I think a recession is coming you can click the link below in the related ideas section.