Walmart (NYSE:WMT) shares have been on a downward trend for the past week after closing at a 2022 high of $145.78 on March 15. Despite the dip, WMT stock remains right about where it was at the start of the year. That’s something not a lot of stocks can say these days. With economic warning signs like rising interest rates and surging inflation mounting, should you buy Walmart stock as a safe haven?
It was a proven performer during the pandemic, with WMT stock delivering a return of 40% between the end of February 2020 and November 2021. Those are not spectacular gains, but solid.
Since then, shares have been on a bit of a roller coaster thanks to the seemingly never-ending list of global concerns that triggered a broad market pullback through 2022. However, if the situation worsens and develops into a full-blown economic crisis, WMT stock may be one of the best choices to weather the storm.
Are We On Track for a Recession?
A bit of background, first. (Not that you need it if you filled your vehicle’s gas tank, tried to buy a home or have gone grocery shopping any time in the past few months).
Earlier in March, it was reported that the U.S. inflation rate had hit 7.9%. That’s a 40-year high. Bad as it is, that number doesn’t include the latest round of gas price hikes triggered by the Russian invasion of Ukraine. Last week, the Federal reserve approved a quarter point interest rate hike. That’s the first hike in interest rates in over three years. It’s just the first in what is expected to be a series of six rate hikes in 2022.
Everything is getting more expensive, fast. It’s also getting more expensive to borrow money. The pressure on consumers is mounting.
On Tuesday, billionaire investor Carl Icahn told CNBC he expects “there very well could be a recession or even worse.”
Consumers Buckle Down
In tough economic times, consumers buckle down. The focus is on basics as opposed to luxuries. This is exactly the kind of environment where Walmart stands out, which is why WMT stock is well worth looking at these days.
Walmart is the nation’s largest grocery retailer by a wide margin. Its stores are packed with goods ranging from clothing to electronics that are priced to be affordable. You don’t go to Walmart for premium brands and high-end products. The company seriously upped its e-commerce game during the pandemic. Walmart is ready for tough times.
I’ve previously written that Costco (NASDAQ:COST) is a smart play in terms of companies that are positioned to ride out the current economic storm. Walmart shares many of the positives of Costco, but it has several advantages for mainstream consumers. The company has far more physical stores than Costco and they are distributed throughout the country, not just larger urban centers. Walmart doesn’t focus on bulk buying, which requires an expensive initial outlay and storage space at home. And Walmart doesn’t require shoppers to pay for a membership.
WMT Stock Thrived During the 2008 Great Recession
The so-called Great Recession started in December 2007 and lasted through mid-2009. It was the country’s worst financial downturn since World War II. The period was marked by double-digit unemployment, a dropping GDP and a collapsing housing market.
During that time, the S&P 500 declined by around 40%. In stark contrast, WMT stock slipped by just 1%.
What we are facing now is a completely different set of economic circumstances. However, the end result of rising interest rates and runaway inflation will likely play out in a similar way in terms of consumer spending. Consumers will be focused on saving money, getting back to basics and getting the biggest bang for their buck.
In short, we are in challenging economic times, and they may get worse before they get better. These are circumstances where many stocks perform poorly. But history has proven that Walmart shares are resilient during tough times.
Bottom Line on WMT Stock
WMT stock scores a “B” rating in Portfolio Grader. So far as long-term growth stocks go, it has been a steady performer, but not spectacular. Over the past five years, it has delivered a 105% return. It also offers a dividend. As InvestorPlace contributor Mark R. Hake points out, that dividend has now been raised on an annual basis for 49 straight years.
It may not be exciting, it may not deliver huge gains, but WMT stock is doing better than many others in 2022 and it’s a safe bet during challenging economic times.
On the date of publication, Louis Navellier had a long position in COST. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
