The Consumer Recession of 2023-2024 and the Future

Alright so this going to be a long post so bear with me. I think we are currently in a consumer recession right now. Now you’re probably thinking ok but how? GDP continues to grow, unemployment continues to be stable, and the market is higher than ever right now. I am going to talk about some companies here that will hopefully give support to my theory.

1. Microsoft (MSFT)

Now you’re probably wondering why this is the first company I am bringing up when Microsoft grew revenue and income. Microsoft grew revenue by 10% and net income by 20%. Microsoft does both software and hardware. The software parts of the business like Office, Cloud, and Services increased substantially. However when you look at the hardware side of the business it paints a different picture.

Device revenue decreased 20%. These are things like personal computers, accessories, and other electronics that Microsoft sells and this part of their business declined considerably. Gaming revenue decreased by 5% with Xbox hardware sales falling 11%. We are currently seeing a similar trend in 2024. People are pulling back on items like PCs and gaming consoles.

Now you’re probably thinking “yeah random redditor not everybody buys PCs/Xboxs every year. This means nothing.”

So now we go to our next company.

1. Apple

Like Microsoft Apple is a big tech company that is integrated into our society and the every day consumer. If you don’t personally use them you know someone who uses their products. If we look at Apples results in 2023 and we look at product sales they declined from 316.1 billion to 298 billion. Hardware sales were down across the board. Macs, iPhones, iPads, and Wearables all declined. However no what didn’t decline? Services. Like Microsoft services grew for Apple from 78.1 billion to 85.2 billion. Once again we are seeing this pattern of physical products that appeal to the middle class consumer fall.

Now you’re probably thinking “yeah random redditor but Apple isn’t cool anymore so of course their products are not selling. So that makes no sense and means nothing in the grand scheme of things.” Ok let’s keep going.

1. Nike

Nike is a global fashion and one of the biggest in the world if not the biggest. Like Apple if you don’t use their products you personally know someone who uses them. They’re everywhere. Nike reported a decline in revenue by 2% in 2024 and is currently forecasting a 10% drop in Q1 2025 and a drop for the full year of 2025. We saw Nike report product declines like their shoes in 2024 and it’s expected to get worse in 2025. The stock is currently sitting at a multi year low and besides Covid these levels haven’t been seen since 2018.

Now you’re probably thinking “ok random redditor but Nike isn’t cool anymore and Adidas is better and sells more track suits to the Eastern Europeans. So it makes sense why it’s down.” Ok lets look at more.

1. Home Depot and Lowe’s

The two home building retailer giants of the US. If you own a home or have done work on your home you’re familiar with these 2 companies. These 2 companies are staples to the entire US economy. Similar to UPS and FedEx if you want to get a general look at how the economy is doing you’re paying attention to these two companies as they’re crucial to its health. In 2023 we saw Home Depots sales decrease by 3% and earnings decrease by 9.5%. We just saw Home Depot recently report their earnings and according to them they expect more pain as the consumer continues to pullback. We saw a similar result for Lowe’s. They reported a net sales decrease of 11% and are forecasting another sales decrease in 2024. With expectations being another 2-3% fall in comparable sales.

Both Home Depot and Lowe’s stock are still down from their highs in 2021. Home Depot is down 16% and Lowe’s down 10% which was close to 3 years ago.

Now you’re probably thinking “ok random redditor but those are boomer companies nobody cares about.” Ok how about another one.

1. Target

Target is a company that you know well cause you either have a mom or a girlfriend or both who spends their day there. Target is the upperclass Walmart that is a bit more luxurious and like all the other companies I mention they appeal to the middle/high class.

In 2023 Target reported a sales decline of 1.7% and a comparable sales decline of 3.7%. Full year revenue decreased by 1.7%. The company going forward is expecting a continued consumer pullback and is expecting either flat or declines. Target stock is currently down 48% from its high with its high being in 2021.

I can really keep going with this. Here is some more.

1. Estee Lauder: massive stock decline

2. Ulta Beauty: massive stock decline

3. UPS (a crucial economic stock): massive stock decline

4. Lululemon: massive stock decline

5. Dollar General: massive stock decline

6. Hershey: massive stock decline

7. Starbucks: massive stock decline

Now what is the point of all of this and all these companies mentioned and talked about? These are all companies that sell a semi luxury product that appeals to the middle class consumer. Now we are seeing the middle class consumer pull back on these products. Maybe you’re not buying the next Microsoft PC this year, or the new iPhone, or the new pair of Nike sneakers due to rising costs in other areas. This is causing the market to price in future bad results and causing the stock price to crash.

We are seeing a case where the market is not reflecting the economy. Businesses all across various industries are showing declines across the board and it’s only expected to get worse. Now with all these declines in other industries why is the market so high? The answer is tech. Companies like Nvidia, Google, Amazon, Microsoft, Apple, Meta, Broadcom, Qualcomm, AMD, etc. are dominating the market. With these stocks continuing to increase and other stocks continuing to decrease it’s only getting worse. They have a heavy weight on the indexes and they’re causing most of the gains in the index while we are seeing other sectors decline.

This has caused tech valuations to soar and other areas of the market to lag. Now what does this mean going forward. Are we due for a massive decline in the market where we see tech finally come down?

I personally don’t think so. However I think going forward we won’t see the returns that tech has given now going forward. I think these stock declines in the market has presented opportunities and we can possibly see a sector rotation. For example the Fed cutting rates and alleviating pressure on the consumer. A case where tech lags behind and we see other areas of the market which have fallen start to climb. I could be wrong on this but these are just my thoughts. Let me know what you think about this theory.