The Value Shift: How Discount Retailers Signal Economic Uncertainty
March 2025 Market Update
Good morning subscribers.
Two months into the year and it’s been well…. I’ve got two words for you:
Uncertain
Volatile
Of course, these go hand in hand when talking about markets.
The S&P 500 has shown a lackluster performance this year, down almost 2% after closing on Friday, March 7th with the Magnificent 7 leading the way.
This all followed a strong two-year run in 2023 and 2024. Now the year to date 2%, and 7% from all time highs, decline is reflecting investor unease over tariffs, inflation, and mixed economic signals.
Looking short-term, the S&P faces headwinds from policy uncertainty and a potential consumer slowdown, though discount retailers hint at resilience.
Over the long term, the S&P’s 10% annualized return over 100 years shows its growth potential, but I am forecasting ~3% over the next decade. Bonds have a higher probability of out performing during this period.
Speaking of bonds, the bond market has seen notable shifts, particularly in long-term yields. The 10-year Treasury yield has slid from 4.8% in mid-January to 4.3% by earlier march, dipping below three-month bill rates and signaling cooling growth expectations.
Short term, this drop reflects a flight to safety amid stock wobbles and stalled Fed rate cuts, with the federal funds rate steady at 4.25%-4.5%.
Long-term, bonds remain appealing as yields stabilize. For the me, this S&P stagnation and bond yield decline warrant our underweight equities and over weight bonds.
As cautious as we can be with markets, there is always something more to look at and see what we can learn or gain from researching certain sectors and how they pertain to the future.
Let’s dive deeper into the topic of discount retailers and what this might signal about consumer spending pressures and potential recession risks.
Discount Retailers
Americans have turned to discount retailers, favoring value over luxury in their shopping habits.
Since 2022, these key players reveal a clear shift toward budget-conscious spending…
Dollar Tree (DLTR)
Dollar Tree has expanded its $1-and-up pricing to meet rising demand for affordable options, however the stock itself has struggled.