![]() If enough people lose their jobs, household spending decreases, which is disinflationary. The sad truth is that as more people are employed, a greater amount of money flows through the economy, creating inflationary pressures. One of the key metrics economists watch for in predicting inflation in the labor market. In January, the Consumer Price Index (CPI) decreased by 0.1% - a very, very welcome sign after multiple months of double and high single-digit reports. ![]() For the last several months, the Fed has been relentlessly raising rates in an attempt to tame inflation. The labor market simply won't take the hint. In this article, we will outline our case for why we are negative on Home Depot stock in the near term given the broad macro headwinds the company faces and a valuation that does not reflect the risk posed by a recession. While the broader market has rallied over 8% in the new year, HD's stock price has only improved 1.49%. While the stock has outpaced the S&P 500 ( SP500) over most long-term time frames by wide margins, investors seem to have woken up to the fact that the party may be over. Analysts estimate that Home Depot's revenue in 2022 will grow by 4% YoY, and they forecast a meager 1% in 2023. Those halcyon days, however, seem to be over. ![]() In 20, however, sales exploded, up 19% and 14% respectively. From 2014-2019, the company grew sales at a mid-single-digit pace. As millions of Americans were locked down at home and provided stimulus checks, the massive home-improvement chain benefited tremendously from increasing home-improvement spending. ![]()
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