Walmart’s Price Hikes Open Door to Increases From ‘Everybody Else’
Company’s announcement on tariffs sends clear signal that higher prices are on the way
President Trump’s trade war has yet to make a real dent in the American economy. That is about to change.
On Thursday, the retail giant [Walmart] said that the [cost of tariffs] was forcing the company’s hand, and that it would hike prices on all sorts of goods later this month and into the summer.
So far, Trump’s tariffs have had a muted effect on inflation. Walmart’s announcement suggests that a dam is breaking and that a flood of higher prices could soon follow.
“If Walmart is doing it, everybody else is probably going to be doing it—if not already, they will be in the future,” said Alan Detmeister, an economist at UBS. He and other economists expect the consumer-price inflation rate to increase to about 3.3% over the next year, from 2.3% in April, should current tariff levels remain stable.
Ford Motor’s CEO already announced four figure price increases, coupled with the arrogance to contend that people would willingly pay them, by financing for a longer term, or making cutbacks elsewhere, to make their car payment.
Not just those “waiting”, but those trading it as well. The recent fedwatch chart (distilled from actual trades, using real money, of interest rate futures) shows that a June cut is not happening at this point, and a July cut is doubtful (~30%). It still has a high probability of a September cut (nearly 70%), but even that probability is dropping slowly. And it’s down to a ~70% chance of two cuts (0.5%) by December. That’s down from 3 cuts (a total of 0.75%) from just a few weeks ago.
Fedwatch seems to show this repeatedly for the last year or so. I wonder if there is some artifact of interest rate future trading that causes an initial “high” estimate that slowly declines over time as new data arrives? You would think that there shouldn’t be much of a bias to “high”, with the distribution being equal between “high”, “low”, and everything in between. But maybe there is some odd bias here?
I thought of that possibility. Maybe when interest rates are “going down”, there’s a bias of expecting more down than reality, and when interest rates are “going up”, there’s a bias of expecting more up than reality. Seems logical to me.
But I couldn’t find any data to support that. All I see right now (the last year or so) is high expectations for cuts that slowly go down with most new data points. Has anyone found a dynamic chart that shows “expectations versus reality” and the change over time of those curves?
Housing starts rose 1.6% in April, partially rebounding from the sharp fall registered in March. The total gain was the result of a jump in multifamily ground-breakings, which was more than enough to offset a slip in single-family starts… a surprisingly steep decline in building permits is the latest evidence that residential construction is slowing as builders contend with high mortgage rates, an elevated inventory-to-sales ratio and increased policy uncertainty.
While the market has moved up almost 25% from the bottom, various parts of economy are struggling. So at some point Fed may cut the rates. So how much market will welcome that needs to be seen…