November 14, 2019
Since last year, we’ve been tracking the progress on this “domestic rebalancing” by watching this “Amazon versus Walmart” chart (from one of my June 2018 notes).
The divergence in this chart represents the regulatory favor that has been given to the tech giants. It epitomizes the disruptor/disrupted economy.
That favor has not only disrupted industries, it has nearly destroyed them, and created monopolies in the process.
But the regulatory tide turned last year, finally. What started as verbal threats and Twitter attacks by Trump, against the tech giants, slowly materialized into policy. We’ve had the repeal of “net neutrality,” which may ultimately lead big platforms like Google, Twitter, Facebook and Uber to transparency of their practices and accountability for the actions of its users. We have the Supreme Court ruling that subjects internet sales to state tax. And the flood gates have scrutiny have since opened even wider.
This has provided the catalyst for old economy stocks to bounce back.
With that, we’ve been following this Walmart/Amazon chart looking for the “jaws” to close in the chart. So, with Walmart’s big earnings report today, let’s take a look at an update …
Not only have the jaws closed on this huge divergence, but there is a new divergence, as Walmart is now outpacing Amazon. Since the summer of ’18, the performance of Amazon stock is flat, while Walmart is UP 45%.
As we’ve discussed in my past notes, we’ve finally entered the stage where we see the disrupted/survivors, competing, if not beating the disrupters. After all, if the historical “giants of industry” have moved aggressively to align with the changing economy, they have the distribution, in many cases, to be the ultimate winner. We shall see.