💣 Target Just Dropped a Bombshell—The Unthinkable Has Started!

Target has just warned the unthinkable start and it's quickly spreading across the economy, threatening an all-out recession. Now it's over to Bloomberg where he picked today's story up on the headline, is Target cut sales forecast on shopper pullback? And if we go back to last quarter, what did a lot of these executives tell us? That they believe that the economy is strong, that it was going to grow and consumers were going to spend. And we continue to look at the data and say the exact opposite was going to happen. That paychecks relative to inflation were shrinking, consumers were overloaded in debt and interest rates were on the way up. And what that meant was a perfect storm for shoppers to pull back in a major way. Now we're starting to see it, it's spreading all across the economy and the danger now is it's going to push us right into a recession. The company now expects net sales to decline by a low single digit this year, we'll call that optimistic. Down from previous guidance for an increase of about 1%, comparable sales dropped 3.8%. Keep in mind that's not inflation adjusted on slower shopper traffic as consumers also spent less per visit. So what are we seeing now? Consumers are saying, look, our paychecks aren't going as far. We're worried about our jobs and our income. They're going to the store less and when they're there, they're looking for deals and spending less money. And right now what you're hearing from Target is they believe the worst is behind us. But what we believe is the worst is yet to come. The data has been very clear about this. The problem is consumers continue to sound the alarm that the economy is heading the wrong direction. And based on what's going in Washington right now, it could get even worse. Stay tuned for that. I want to be clear that we're not satisfied with these results. We've got to drive traffic back to our stores and visit to our site. But the problem is that they don't understand. It's not about what they have. It's not the merchandise. It's the issue. The real factor here is paychecks. We know hours worked are going down. We know inflation is going up. We know debt service costs are a problem. We just heard yesterday from Klarma that people are defaulting on their buy-now-pay-later loans. The issue is the U.S. consumers are out of money. And the evidence is clear as we look at real retail sales in blue against average weekly hours of production and non-supervisory employees in red. And you can see that slowdowns in retail sales are always matched by the slowdown in the number of hours workers get. When their paychecks start to shrink, they spend less. And what shoppers are clearly telling Target right now is we don't have the money. We're running out of cash. We're spending less. And again, this is going to spread all across the economy because I want you to be thinking companies like Target have massive inventory overhangs. This is going to impact manufacturing, the supply chain. You think back to what happened to Port of Los Angeles here with the shipments coming in declining. Workers there are getting less hours. It's all going to reverberate all across the economy. And if you look at big shocks like we're going to face with the tariffs, go back to the dot-com bubble. What happened? There was a big deceleration in the number of hours worked. You see retail sales drop right into a recession. When we look at the years going into the global financial crisis, we could find out that inflation took off, but hours worked didn't keep pace. And actually, you know, as they plunged, so did retail sales. And we could see some pockets of this throughout 2012, 2016, and 2018. And look where we're at now, because one of the most interesting things is we saw a big jump in hours worked, but so far it has not transmitted into a big jump in retail sales. In fact, we can go back and look at the fact that hours worked were on the decline, but yet retail sales held up. And there's one key reason here, and everything due to inflation, but right now consumers struggling with their bills and high interest rates and a slowing economy. So you can see a jump in hours here wasn't enough. In fact, what it suggests, based on what we're hearing from a lot of employers, it's going to reverse direction when that happens. A U.S. recession almost becomes a foregone conclusion. But I want to know what you think. Do you think the economy is turning around here, or do you think it's about to plunge down? Weigh in the comments below, because let's talk about inflation and the impact it has on paychecks. Again, we go back to the late 90s, where do we see the consumer price index on the rise? We know hours worked were not rising to give people the income they needed to afford higher prices. Retail sales go right down into the recession. You see the impact of rising energy prices, well, that pushed us right into the global financial crisis as consumers had to cut back on their discretionary spending. So I want you to think of the parallels between the GFC and now the tariffs. This is going to be a huge shock. We know companies like Target are saying, look, price hikes are coming, and soon when that happens, you're going to see a whole other side of this economy go flat on its face. And let's look at what happened in the recent years. If it wasn't for inflation coming down and decelerating, retail sales likely would not have held up. And right now, due to the front running of tariffs, we see a jump there that's transmitted into more hours. But what it didn't transmit into is more spending. Because again, right now, consumers are worried about the economy. They're starting to save more and spend less. And for a lot of retailers like Target, this is a huge problem. In fact, what it's telling us is the unthinkables here. It means consumers are out of money. He says that Target has to move with a greater sense of urgency, attributing the results to weakness and discretionary spending. But it's obvious because he knows declining consumer confidence and uncertainty over tariffs. And these are things that Target cannot fix. They cannot force people to come out and spend on the discretionary side of the economy. They can't deal with the tariffs, and they can't raise confidence. But they could help raise paychecks. But you think about how all this is going to transmit, and it's all going to lead to less demand. And in a consumption-based economy, that is the biggest red flag that sends us into a recession is when U.S. consumers start to pull back on their spending, start to save more. And next thing you know, it creates a large feedback loop and points us in the wrong direction. But something you should move with a sense of urgency, well, at least our CTA Timer Pro subscribers did when they jumped on our trade on uranium back on April 24th. As of yesterday, it's closed up 16.81%. How did we do this? We saw that the machines were likely to be big buyers. We told our subscribers to jump in on this trade, and we think it's going even higher. In fact, today during trading, it's up. We think there's a lot more upside potential. Grab the links in the description below. Use the coupon code for your free 30-day trial. Start trading against machines and winning. Stay tuned to the end of the show for more information. Because the real risk here is Target looks for answers. One place employers said they don't want to look, and that's their workforce, to save money and try to bring price pressure down. And you can see, when real retail sales in blue decelerate, it leads to an increase in the unemployment rate. This isn't just due to retailers. It's the whole supply chain. It's manufacturing. It's imports. It's everything starts to slow down because what happens is inventories build up. It's a huge problem for Target. But again, think about all the employers out there that are about to see a decrease in demand. They've been working aggressively to cut their expenses, to try to absorb as much of the tariffs as possible because they know. They know the hard truth. You raise your prices, your clients, your customers, they're going to go away. That means you have one last place to cut expenses. Again, it's your workforce. And we can see going into the global financial crisis, as sales went down, demand fell. Well, the demand for labor fell as well, and we see the unemployment rate rising. You look at the decline here in real retail sales going back to 2022, matches perfectly in line with the bottom of the unemployment rate. If we see retail sales roll over, which I think we're going to see, it means the path for the unemployment rate likely to head significantly higher. And so again, you're seeing all the recipes of a stagflationary recession start to build. Rising prices, slowing income, rising unemployment. You can see Target's efforts here to try to increase discretionary spending, they're not going to work at all. We recognize we got to make sure each and every day we deliver the right products, because that's not the problem. The right assortment, again, that's not the issue. The big one here, the right value that brings guests into our stores and digital sites. The fact that people are going to the store less and spending less is a big indication that their dollar isn't going as far. Now, I want to know from you, are you still spending at the same rate before, or are you shopping less and spending less? When you go way into comments below, I want to know how the trade war is impacting your finances. The company has excess inventory due to lower-than-expected demand and plans to adjust it during the second half of the year, meaning we're going to start hearing from a lot of retailers about their inventory overhang, and what this is going to lead to is massive discounts. So there is a concept that many believe that inflation is going to go higher due to tariffs, but there's going to be offsetting effect, because all of this inventory that retailers are sitting on, especially at the wholesale level as well, it's got to get cleared out. It's going to get old, it's going to get discounted, and that means we're going to see continued disinflationary signs in the economy. And yet, what's happening at Target is also spreading to Lowe's as they beat sales expectations bucking tariff volatility, but the details don't suggest it was that great. The Home Improvement Retailer says comparable sales dipped 1.7% in the quarter, but still expects key sales metric to be flat up to 1% in the current year. Again, just the same optimism we saw last quarter that these executives wanted everyone to believe that things were fine, they were going to turn around, keep buying our stock, because if we told you the truth about what's actually happening, our stock price would plunge. They don't want that. Instead, now we start to get the early signs of the trade war. The comparable sales decrease came amid poor weather in February, along with continued pressure on the retailers' higher cost discretionary sales and do-it-yourself business. They might as well have just said their rank-and-file customer is running out of money. They're spending less. They're doing small projects. They're not doing big ones. And it makes perfect sense, because not only do they not have the money, the cost to get credit to borrow money is too high, and the outlook for the labor market is weakening. Want to know from me, are you doing big projects, or are you just doing small projects around the house? What are you doing? Weigh in the comments below. Because of the results of Lowe's and Maine's, competitor Home Depot suggests that U.S. consumers have yet to curtail or make major changes to their own spending, despite economic turbulence. But keep in mind, we're now at the beginning of seeing the tariffs start to impact the economy. This is exactly what the Port of Los Angeles said. They said, look, there's going to be no real impact. And then when the number of shipments came in, dropped 30%, they said, oh, look, a whole bunch of hours for a lot of workers got dropped because we didn't need them. So what we're hearing this quarter is we're just starting to see the very beginning of the trade war starting to impact consumer spending. The worst economic scenarios appear to have passed us, according to Home Depot execs. Spain has remained steady and there is limited tariff-fueled stockpiling. Well, we know there was a lot of tariff-fueled stockpiling. Maybe they don't want to admit it, but a lot of companies did. But here's the question I have for you. Do you believe that the worst is now behind us? I don't. But I want to know from you. Is it behind us or not? Weigh in the comments below. And why? Because now we're finding out that there's a price to pay for higher interest rates and massive debt and deficits as traders brace for Treasury 10-year yield at 5% as mood sours. And to date, we saw a fairly poorly received 20-year Treasury auction. What happened? Stocks reversed direction. Bonds down as interest rates rose. Right now, people are betting big on the upside of the equity market, but in order for that to happen, interest rates need to reverse and head down. Right now, everyone is shutting the bond market, shorting it in a big way. But I want you to think about the implications here. The economy is slowing, paychecks are shrinking, inflation is rising. And what does that mean when you tack on higher interest rates on top of it? Well, it puts a massive brake on the economy. Home Depot and Lowe's says, look, spending is going to turn around. The worst is in. But at these rates, unlikely. Traders are piling into bets that long-term Treasury yields will surge on concerns of the U.S. government's swelling debt and deficits. A situation made more precarious by President Donald Trump's tax cut bill. The bond market is going to have the final say on what happens fiscally. This is a comment I made the other day. Lawmakers are going to get tested more. Five percent is not the final line in the sand. Keep in mind, there's some big risk here because if this tax cut doesn't get passed, well, think about this. That means taxes are going to go up at the same time. We've got to deal with tariffs. This is going to be a major blow to a lot of household finances. But let's talk about the impact of rising rates on, of course, real retail sales. Again, while Home Depot and Lowe's execs say it's not a problem, it is a huge problem because if you go back and look at history, you can see periods where the Fed was raising rates just trying to constrain demand here. As we look at the funds rate in red, what happens? Real retail sales go down. So whether or not it's a slowing economy or it's the effect of interest rates, it still has an impact. Again, you see the funds rate up here around 2006 to 2008. What happens? It's curtailing demand. Again, people don't want to borrow at those high rates, and that means retail sales come down. And what are we seeing here? Fed's saying, look, we're going to stand pat. We're worried about inflation. We want to crush demand. Well, right now, what we're seeing is high prices and slowing economy and shrinking paychecks are going to crush demand. Interest rates are only going to make it worse. And you can see the effect it's going to have on the housing market that's going to back feed right into sales for Lowe's and Home Depot. Again, they think things are going to get better next quarter. I don't think they have a chance of getting better. As U.S. mortgage rates rise to three-month highs, slowing home demand. The index of applications for home purchase, as well as a gauge of refinancing each, decreased to around 5%. The applications figures indicate a lack of sustainable momentum in the housing market. Again, what is this telling you? People do not want to buy a home when the economy is slowing. They don't want to buy a home when they're worried about their job, how they're going to pay for their mortgage. Yes, of course, they want to move. They want a nicer home. They want to move somewhere else. But right now, what we're seeing in the housing market is a broad slowdown. The problem is, it's going to put a lot of people out of work. Keep in mind, builders are sitting on the largest inventory overhang since the financial crisis. If they don't get sold, well, that means they're going to stop building and have to clear out inventory. It's going to hit the resale market, too. While the contract signings of new and previously-owned houses firmed up in March, elevated borrowing costs and home prices are proving a larger hurdle for many prospective buyers. And here you can see the relationship between new privately-owned housing starts in blue against consumer sentiment. This is from the University of Michigan. That in red. And you can see a very strong relationship. What did the University of Michigan recently report? A huge plunge in confidence. What does that mean? That they're not going to go out and buy homes. That means housing starts are going to plunge. And if we were to overlay a chart of the unemployment rate against that, what we would see is the unemployment rate would go up. Because, again, when you're building houses and people are consuming and moving, what it does is it creates a lot of jobs. Without it, we're again at risk for a housing slowdown as well as an inventory overhang slowdown as well as the fact that we could see the unemployment rate rise as employers look to cut costs even more as demand falls. And Trump import tax hike counters income tax relief that's according to economists because the risks now are high. If this tax bill doesn't get passed, watch out. President Donald Trump, his lieutenants and Republican lawmakers all argue that a sweeping tax bill now winding its way through Congress will spur investment and spending, helping unleash a new golden age for the American economy. And I want to know from you, do you agree with that? Do you disagree with that? Weigh in the comments below. Because the trouble is Trump is also raising taxes that is on imported goods that will likely erode households purchasing power, which is exactly what we're seeing from Target, Home Depot, Walmart, Lowe's and undercut the expansion. The administration assures a newly raised tariff wall will spur a shift in production to the U.S. leading to higher employment. Many economists are, however, unconvinced. In the meantime, surveys suggest that uncertainty over final tariff rates risk undermining investments, something we continue to hear from businesses. But their bottom line is even if tariffs are keeping businesses from investing, if consumers aren't spending, businesses have no need to invest because they don't need to upgrade their production. Here we can see the Chief Political Economist at Goldman noted that they estimate the import duties will offset the lift to growth from the tax legislation for the next two years. What they're suggesting is it's going to be a drag on an economy that's already decelerating. And I want to understand why the risks are so high here. It's really summed up very clearly. Taking a look at the bigger picture, keep in mind that the bulk of the tax bill is just extending the tax cut from Trump 1.0, which is why the bill does not pass. It would be equivalent to a huge tax hike, one which would lead to a lower budget deficit, but lead to an immediate recession, which translates into a mask of fiscal headwind. So again, the risks are high here. If that doesn't go through, what we could face is consumers seeing their paychecks shrink even more as their tax bill goes up. And for a lot of retailers, this would be the end because at this point, a U.S. recession becomes the base case. Financial crisis then gets on the table in a major way. But just because the economy is facing a lot of headwinds doesn't mean your trading account has to as well, because right now our Uranium trade is seeing a lot of tailwind behind it. Now we put this trade on back in April to our CTA time where pro subscribers, not only did we note a technical head and shoulders bottom, but we saw that the machines were going to start to buy and sure enough, we positioned our subscribers on the open. And yes, what happened is price rallied from there. It consolidated here recently in the supply zone, but look today, it's starting to break out above the six month volume profile, suggesting another potential four or 5% move up into this zone with a possible breakout that could send it up another 15%. Now how do we do this? Well, each and every day we look at the machine positioning across a broad equity, bond, currency and commodity markets, and then we back tested our results. So we know which signals on each security are likely to generate a positive return. What we do is we then publish that right every day on our hot list. You get the machine positioning across all of the asset classes, but more importantly, you get the report. You get all the tradable signals, but I review all the trades and give you my opinion on the best ones to take. We give you full risk control levels, a tracking of trades and returns, a weekly update and here's the best part of all, we don't want you to put a dime out to try our reports. Why do we do that? Because we're so confident that you can trade against machines and win. We want your first 30 days to be on me. Grab the links in the description below. Use a coupon code for your free 30 day trial. And with that, I'm Steve Van Meter. Thanks for watching. Thanks for being fans. Bye now.