The Market Recently Tanked but Not Walmart and Costco Stocks — Experts Explain Why
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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The stock market recently took some scarily big dips in response to President Donald Trump’s tariffs on key U.S. trading partners. Despite many well-known stocks losing value, Walmart and Costco stocks stayed steady.
Experts explained why that is, and what to look for if you’re invested in these companies.
They Carry Essential Items
Even when the economy is shaky, Walmart and Costco carry something everyone requires, such as food, toothpaste, toilet paper and baby wipes, according to Abigail Wright, marketing specialist and senior business advisor at ChamberofCommerce.org.
“Regardless of what’s going on in the stock market, individuals are still going to have to purchase these things. That’s why Walmart and Costco are stable when other firms are struggling,” she said.
Additionally, according to David Capablanca, a stock trading expert and creator of “The Friendly Bear” trading podcast and The Friendly Bear University, “When the overall markets go down, people are in fear mode. They’re not enjoying their lives like they do when things are going up,” he pointed out.
He said that’s where Walmart and Costco come in, because “they sell cheap, cost-effective products. People just want to save money, and these are the go-to places when that mindset takes over.”
Shoppers Look For Deals in Tough Times
During a shaky economy, individuals make an effort to save money, Wright said. They opt for cheaper brands and shop where things cost less. Costco and Walmart both excel at providing more products for a lower price, she explained.
Why Their Models Work
These corporations have smart business strategies that allow them to thrive when others may not, Wright pointed out.
For example, “Costco operates on a membership model, generating stable revenue even before customers spend a penny. Walmart leverages its enormous size and purchasing power to enable low costs. That’s known as pricing power, and it’s a significant reason why both firms lead the pack,” she said.
Will They Stay Strong If the Economy Gets Worse?
Will these companies’ stocks hold their value even if the economy gets worse? Wright suggested they probably will, but acknowledged there are risks, too. “Such things as high personnel expenses, supply issues or individuals reducing costs even further can derail their sales.”
Despite holding steady, Capablanca said that they’re not “totally unique.” Fast-food companies show similar behavior patterns, he said. “When people stop going to fancy restaurants, they start going to fast food, like Chipotle or McDonald’s.”
The general idea is that businesses that offer decent quality at a cheap price tend to hold up better. “It’s a good defensive play in a tough market,” he said.
Wright added that the secret to a steady stock price is “a matter of selling what individuals require, not merely what individuals desire.”
Advice for Investors
If you’re investing in the stock market, both Costco and Walmart can help stabilize your portfolio, Wright said. That means they can help insulate your money when other shares rise and fall.
“They might not appreciate super rapidly, but they’re stable, and that counts when things get tough,” she said.
There’s comfort for consumers in the fact that “these companies are less likely to crash with the broader market,” Capablanca said.
Of course, it’s also smart to have a diversified portfolio. In volatile times like these, Capablanca recommended selling off the “riskier names” and shifting that capital into more defensive plays like Walmart and Costco.
“You don’t have to do it all at once. You can average over time, like six months, and build up that position as things unfold,” he said.
What To Watch For
If you want to keep an eye on these companies’ stocks, look at the following indicators, Wright recommended:
- Quarterly sales in stores: Look for increases or holding steady.
- Shoplifting losses: Too high — a bad sign for a stock
- Shipping and supply issues: These can sink stocks.
A Hedge Against Future Crashes
Capablanca has confidence that Costco and Walmart have what it takes to continue to thrive even in a hard hit market because of their ability to offer low prices on essential items.
“In fact, they thrive in these types of markets, where people are scared and trying to save money,” he said.
Even better, he anticipates that shoppers will move from much higher price stores like Whole Foods to Walmart and Costco if the economy gets worse.
“That switch adds volume. People are still spending, just more strategically, and that plays right into Walmart and Costco’s model.”
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Sources
- Abigail Wright, ChamberofCommerce.org
- David Capablanca, The Friendly Bear Podcast
