JPMorgan analyst explains why he believes we're in a 'selective recession'

Breathless coverage today because it is pretty astonishing. What do you make of these massive stock moves? First of all, yeah, look, art, the backdrop that we see from a macro perspective based on our work is a selective recession. And what that means is you are going to have extreme volatility. We think the higher income consumer, a lot of wealth creation, nearly 40 trillion by our JP Morgan economists. So that higher income consumer, they're being more choiceful. They are demanding best in class brands in the channel where they can get it conveniently. The low income consumer, that's the melting ice cube and that's where I think you're seeing on the discount side some of the consolidation and a number from a competitive perspective of weakness that you are seeing out there. So you said selective recession. Does that mean you think one is coming or do you think we're already in one from a retail point of view? I think we're in it. And so I think the higher income consumer completely fine. Again 40 trillion of wealth creation that consumer makes up roughly half of consumer spending. The lowest cohort of consumers out there, the lowest 20% only makes up roughly 10% of overall consumer spending. That's the consumer that you see the headlines around and that's that consumer that is gravitating to those value propositions. And I think that value convenience, that's where it's a lot more competitive today, especially with a lot of the big box and an e-commerce out of the pandemic. When I look at the grab bag of declines today, the fact that it's Walgreens and HM, I think to myself is that is that a consumer story? Is that a low income consumer story? Is that just a an e-commerce story and how Amazon is not only supplanting the pharmacy trip, but supplanting the the quick fast fashion trip that you might have used to go on or team Oh, or she in. I think it's a combination of all. And so I think if you really take a step back, one of the things that changed coming out of the pandemic is the consumer backdrop became more convenient. You have buy online pickup in store from Walmart, Target, all of the grocery stores and and you have breadth of offering with e-commerce as you think about Amazon and the pureplay ecommerce digital plays. So when you put that all together, it's a lot more competition at brick and mortar for the historical value players, which would be the Walgreens of the world, the dollar generals of the world, A lot more cutthroat competition and being equal on price to the discounters might not be enough because now you might not be as convenient given that technology advance that's happened outside of their world. Retail is always a big favorite of hedge funds and and investors who think they might be able to make more or less quick money that way if you they can find the right kind of beaten down player, jump in on an inflection point, look at Abercrombie and the massive increases we've seen over there. So if we're in a selective retail recession, where are the stocks where you think that's already priced in? Which ones could be vulnerable to further declines and which ones might actually be able to kind of get the right sizing behind them and then become a more interesting opportunity short the way we size it up that consumer price that the, as you said and kicked off the days of just pushing price are over. You need product improvement. So off price retail, TJX, Burlington Ross stores, they have brands for great value. They're not pushing price. That's that value component where the consumer comes in that treasure hunt and they're and they're wild. So I think off price sets up very well consistent unit growth stories. Ollie's more in the SMID cap I think also fits really well in the non apparel side of that. Dollar Tree I think is very interesting in terms of that discount world is storyline that could have a greater growth profile going forward than looking back. And then you have to be #1 on the brand side, so a Birkenstock, very strong growth story multi year. I think on the value side, some of the changes that a PVH is putting into place with the Tommy and Calvin brands makes a lot of sense from a profitability perspective. And last I would say on that cruise and and leisure side, look, that is a space very similar winners versus losers. You have to have the value proposition and the cruise space I think sets up really well. Royal Caribbean top of the list. Yeah. And then I would say Viking and Carnival also set up very well.