November 24, 2025 04:23 PM GMT November 24, 2025 US Economics US Consumer Chartbook 4Q 2025 Our US Consumer Chartbook Our quarterly US Consumer Chartbook, a one-stop shop for monitoring the US consumer, includes analysis and forecasts for three broad categories: Labor Market & Income, Consumption & Sentiment, and Credit & Balance Sheet. Each quarter, we spotlight a topical theme. In this edition, we give an overview of our 2026 outlook and describe our expectations for a higher-than-usual tax refund season. ...

Core Insights - Target and Walmart reported strong Q3 earnings, exceeding expectations, which has sparked discussions about potential investment opportunities in these retail giants [1][3][4] Target Overview - Target's Q3 EPS was $1.78, beating expectations of $1.76 but down from $1.85 in the same quarter last year [3] - Q3 sales for Target decreased by over 1% year-over-year to $25.27 billion, slightly missing estimates of $25.35 billion, attributed to affordability pressures on consumer goods [3] - Target has cut its full-year profit outlook, now guiding FY26 EPS to $7.00-$8.00 from a previous range of $7.00-$9.00, reflecting a cautious stance on the holiday outlook [6] - FY26 EPS guidance represents a 17% drop from $8.86 in FY25, although FY27 EPS is projected to stabilize and rise by 9% to $7.94 [9] Walmart Overview - Walmart's Q3 sales rose 6% year-over-year to $179.49 billion, surpassing estimates of $177.14 billion [4] - Q3 EPS for Walmart was $0.62, exceeding estimates of $0.61 and up from $0.58 a year ago [4] - Walmart has raised its fiscal 2026 net sales growth guidance to 4.8%-5.1%, up from 3.75%-4.75%, and increased its full-year operating income guidance by nearly 400 basis points to a growth range of 8.5%-9.5% [5] - Annual earnings for Walmart are expected to rise 4% in FY26 and jump another 12% in FY27 to $2.92 per share [10] EPS Revisions and Market Outlook - Both Target and Walmart stocks currently hold a Zacks Rank 3 (Hold), indicating a need for more compelling EPS revision trends for potential upside [11] - Walmart's optimistic outlook and EPS beat may enhance its market prospects, while Target's cautious approach could limit its growth potential [11]

Walmart Inc. (NYSE:WMT), which accounts for 1.86% of Bill Gates’s stock portfolio, is one of his top 15 stock picks. RBC Capital Remains Bullish on Walmart (WMT), Cites Leadership Position, Pricing Discipline, and Long-Term Earnings Growth Potential Pixabay/Public Domain On October 29, 2025, RBC Capital’s Steven Shemesh raised his price target on Walmart Inc. (NYSE:WMT) from $106 to $116, reiterating his “Outperform” rating, The Fly reported. This price revision follows investor meetings with Walmart I ...

Financial Data and Key Metrics Changes - Consolidated revenues increased by 7% for the quarter and 4% year to date, with all reportable segments showing year-over-year growth [13][14] - Operating income for the quarter was $1 billion, down from $1.4 billion in the comparable period last year, primarily due to net investment gains which were $433 million compared to $918 million last year [14] - Adjusted operating income totaled $621 million for the quarter, up 24% year over year, with insurance contributing $153 million to this increase [15][14] - Operating cash flows for the first nine months were $2.1 billion, and comprehensive income to shareholders was $793 million for the quarter [15] Business Line Data and Key Metrics Changes - Markel Insurance segment achieved a combined ratio of 93% for the quarter, improved from 97% last year, with underwriting gross written premiums up 11% year over year [3][18] - The industrial segment reported revenues of $1 billion, up 5% year over year, while adjusted operating income decreased by 9% to $101 million due to softening demand in the auto industry [20] - Consumer and other segment revenues were $291 million, up 10% year over year, with adjusted operating income of $17 million compared to break even last year [21][22] - Financial segment revenues increased by 16% to $162 million, but adjusted operating income decreased by 23% to $61 million due to prior year favorable loss development [22] Market Data and Key Metrics Changes - The international division showed strong growth with underwriting premiums up 25% for the quarter, driven by expanded territories and product offerings [17][52] - The U.S. wholesale and specialty division faced challenges, with a reported decline of 6% in premium volume due to the exit of certain product lines, but was relatively flat when excluding those lines [17][46] Company Strategy and Development Direction - The company is focused on improving its core insurance business by exiting underperforming segments, making leadership changes, and enhancing accountability [2][4] - A new organizational structure has been implemented to streamline operations and improve profitability, with a focus on distinct profit and loss responsibilities for each business unit [27][28] - The company aims to enhance financial disclosures to provide better insights into performance and capital allocation [8][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the improvements made within the insurance segment, noting a commitment to maintaining a conservative approach to reserving and capital allocation [4][29] - The company is optimistic about future growth opportunities in both existing and new markets, particularly in the industrial and consumer sectors [5][34] - Management acknowledged the challenges in the current economic environment but emphasized the importance of maintaining a long-term focus on profitability and capital efficiency [4][30] Other Important Information - The company has returned approximately $1.9 billion to shareholders through share repurchases since the end of 2020, reducing the share count from 13.8 million to 12.6 million [7] - Investment operations yielded an 8.4% return on equity investments, with a book yield on fixed income of 3.5% [7] Q&A Session Summary Question: Expense ratio dynamics in the insurance division - Management acknowledged the current expense ratio of 36% is high compared to peers, but emphasized the importance of focusing on combined ratio and overall profitability while managing expenses [37][39][41] Question: Successes in U.S. wholesale and specialty - Management highlighted that growth in casualty lines is driven by rate increases, while property and professional lines face challenges [45][46][48] Question: Adverse development in international professional liability - Management confirmed that recent adverse developments were due to large claims from prior years, but overall profitability remains strong [56][57] Question: Capital deployment priorities - Management reiterated that share repurchases remain the primary capital allocation strategy, with ongoing sensitivity to market conditions [58][60] Question: Combined ratio opportunities internationally vs. U.S. - Management noted that while both markets have opportunities, the international segment has benefited from a focus on small and micro businesses with lower loss ratios [64][66][68]

Core Insights - During the National Day and Mid-Autumn Festival holiday (October 1 to October 8), the consumption in Minhang District, Shanghai reached 849 million yuan, a year-on-year increase of 10.5% [1] - The total foot traffic was 8.8577 million, reflecting a 2.5% year-on-year growth, with an average transaction value of 96 yuan, up 7.9% [1] Consumption Growth Drivers - The commercial projects in Minhang District implemented various promotional measures, including the distribution of "Spring Shen Beautiful Welfare Coupons," "Minhang Good Goods" selection, car purchase subsidies, and themed activities, which contributed to sustained consumption growth [1] - Major commercial centers such as Shanghai MixC, Bailian South Shopping Center, and Qibao Link Real Estate Plaza were identified as key drivers of consumption growth [1] Key Commercial Areas Performance - The Wu Zhong Road business circle ranked first in sales with 209 million yuan, followed by Xinzhuang and Qibao business circles with 142 million yuan and 130 million yuan, respectively [1] - Ten business circles experienced year-on-year growth, with the Jiangchuan business circle showing the highest increase of 76.5%, benefiting from the growth of projects like Jinyue Lefang [1] Promotional Activities Impact - Various commercial entities in Minhang District hosted promotional activities, creating themed and immersive shopping experiences to stimulate consumer enthusiasm [2] - Bailian South Shopping Center saw a 36.19% year-on-year increase in sales during its 26th anniversary celebration, which included free and threshold-based lottery promotions [2] Consumption Voucher and Subsidy Policies - Since September 26, Minhang District has issued two rounds of shopping vouchers covering 24 commercial complexes, 159 brands, and 807 stores, with a total redemption of 6.3735 million yuan and an order amount of 26.7123 million yuan, achieving a redemption ratio of 1:4.2 [4] - The automotive consumption subsidy policy has been extended until October 31, with a slight increase of 2.05% in automotive sales during the holiday, totaling over 800 vehicles sold and generating over 110 million yuan in sales [5] Sector-Specific Performance - The gold and jewelry sector in Minhang District experienced a year-on-year sales growth of 39.3%, driven by high demand for new accessories and record-high international gold prices [6] - The restaurant sector also saw a year-on-year sales increase of 5.04% during the holiday period [6] Event-Driven Consumption - The 2025 Shanghai Rolex Masters achieved a record audience attendance, with expectations of over 240,000 attendees, of which over 70% are from outside the region [6] - A ticket-related consumption discount initiative was launched, involving 17 commercial entities and over 200 merchants, generating over 580,000 yuan in related consumption [6] Local Brand Promotion - The "Minhang Good Goods" initiative aimed to enhance the visibility of local brands through online and offline channels, resulting in nearly 110,000 yuan in sales from community markets and 8.437 million yuan in sales through the "Vipshop" app since its launch on September 14 [9] - The ongoing evaluation and selection of "Minhang Good Goods" has further stimulated regional consumption [9]

Group 1 - Macy's Inc. is considered one of the most undervalued retail stocks, with Morgan Stanley raising its price target to $16 from $12 while maintaining an Equal Weight rating [1] - Evercore ISI maintained a Hold rating on Macy's with a price target of $14, while Telsey Advisory raised its price target to $17 from $14, maintaining a Market Perform rating [3] - Macy's operates as an omnichannel retail store managing three brands: Macy's, Bloomingdale's, and Bluemercury, selling a variety of merchandise across 43 US states, the District of Columbia, Guam, and Puerto Rico [4]

Group 1 - The ISM services number came in weaker than expected at 50, indicating potential inflationary pressures in the service sector, which constitutes 60% of the CPI index [1][2] - Prices paid by service sector companies increased, suggesting that inflation in services may be more persistent than previously thought [1][2] - Employment index in the ISM report showed a slight improvement at 47.2%, indicating challenges in assessing the true state of the economy without government data [1][2] Group 2 - In the absence of government data, alternative indicators such as Red Book same-store retail sales and OpenTable restaurant data are crucial for assessing consumer health [1][2] - The consensus forecast for inflation is at 3% for the next 12 months, higher than the Fed's target of 2%, raising concerns about inflation risks if the economy does not slow down [2] - The Fed may need to consider rate hikes if inflation remains sticky and does not decrease as expected [2] Group 3 - Consumer spending has been resilient, but persistent inflation could lead to reduced real spending as prices rise [2] - Higher inflation for an extended period may result in higher interest rates, impacting borrowing costs and increasing delinquency rates on consumer credit [2] - The AI sector is becoming increasingly concentrated, with the top companies driving significant market performance, raising concerns about potential overvaluation [5][6] Group 4 - Historical data suggests that government shutdowns have minimal impact on market performance, with markets often rising during shutdown periods [21][22] - The upcoming earnings season is critical, with expectations for a 7% year-on-year gain in Q3 for the S&P 500, particularly strong in technology [29][30] - Valuations are elevated, with the S&P 500 trading at a 42% premium compared to a 20-year history, indicating potential risks for future returns [33][34]

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Investment Rating - The report does not explicitly provide an investment rating for the industry [1] Core Insights - Exports have stabilized sequentially amid a tariff truce, with nominal exports rising 0.8% month-over-month seasonally adjusted, following a decline of 0.4% in April [5][11] - Exports to Europe improved significantly, increasing by 9% cumulatively over the past three months, partly due to a ~10% depreciation of the RMB against the EUR since the end of January [3][11] - The outlook for export growth is cautious, with expectations of 0% nominal export growth for 2025, indicating a potential decline of approximately -5% year-on-year in the second half of the year [4] Summary by Sections Export Performance - In May 2025, exports totaled $316 billion, showing a year-on-year increase of 4.8% [6] - Exports to the US contracted at a milder pace of -8% month-over-month seasonally adjusted after a significant drop of -25% in April [11] - Consumer goods exports showed a rebound, aligning with their high elasticity of demand, while rare earth exports continued to decline [11] Import Trends - Imports totaled $213 billion in May 2025, reflecting a year-on-year decline of -3.4% [6] - The decline in imports was driven by a persistent decrease in commodity volumes and prices, indicating weaker global and domestic demand [3][11] - Notable declines in specific products included unwrought copper and products (-16.9%), steel products (-20.0%), and crude petroleum oil (-22.1%) [6] Trade Balance - The trade balance for May 2025 was reported at $103 billion, an increase from $96 billion in April [6] - The overall trade balance for the first five months of 2025 reached $273 billion, compared to $298 billion in the same period of 2024 [6]

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Market optimism is increasing due to anticipated trade deals, despite a modest contraction in real GDP of 0.3% in Q1, driven by strong imports and a robust private domestic demand growth of 3.0% [1] - Employment data shows an increase of 177k jobs in April, with the unemployment rate stable at 4.2%, although future labor market data may weaken due to tariff impacts [1][29] - The report anticipates three stages of tariff impacts: front-loading of demand, increased uncertainty, and eventual supply/demand reduction [15] Summary by Sections Economic Activity - Real GDP contracted by 0.3% in Q1, primarily due to surging imports, while private domestic demand rose by 3.0% [16] - Strong consumption and investment in Q1 may be partially attributed to tariffs, with unit auto sales remaining high at 17.27 million in April [17][19] - The report forecasts a 1.4% increase in GDP for Q2, supported by front-loading activity and a decline in imports [19][73] Labor Market - The hiring rate was stable at 3.4% in March, but job openings fell, indicating potential future weakness in the labor market [26] - Continuing jobless claims reached their highest post-pandemic level, suggesting a possible rise in the unemployment rate to 4.4-4.5% in May [31] - April employment data reflects conditions prior to the April 2 tariff announcement, and subsequent data may show the effects of weak hiring [29] Tariff Impacts - The report outlines that the immediate impact of tariffs has increased uncertainty, leading to a pause in investment and hiring plans [25] - Tariffs on many goods from China are significantly high, which is expected to reduce imports and impact related sectors like manufacturing and transportation [34][40] - Planned layoffs due to tariffs have started to rise, indicating potential future job losses in manufacturing and other sectors [41] Inflation and Price Trends - Core PCE inflation was stronger than expected in Q1, with a slowdown to 2.6% YoY in March, and the report anticipates that inflation will largely be concentrated in goods prices [46][47] - The report suggests that the timing and magnitude of tariff-related impacts on the economy are difficult to estimate, with inflation likely to rise as tariffs remain high [49][78] Federal Reserve Outlook - The report expects the Federal Reserve to cut rates by a total of 125 basis points this year, starting in June, contingent on labor market data weakening [49][50] - The Fed is likely to maintain policy rates in the upcoming meeting, focusing on inflation and labor market conditions [50][51]