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Is Recession Trade on Market Pain Spreads Beyond Tech?

BUSN 410 Week 7 Assignment

Develop a business editorial that presents your position on a timely business issue. Support your position with credible references on your topic of interest.

Analysis of the Business Editorial: “Is Recession Trade on Market Pain Spreads Beyond Tech.?”

The business editorial being analyzed for this paper's purposes appeared in the Wall Street Journal online issue of May 20, 2022 (Langley, 2022). The stocks of companies that sell staple foods have largely been shielded from the pandemic. They were stable a while ago. However, the article speaks of the fact that the stocks have continued to decline. Even the companies that sell the consumer staple goods like foods and beverages have not been left behind. The author's main statement is that the large intraday swings in the stock trade had not been experienced since March 2020, when the pandemic struck, and the economy was in a recession. As a result of the economy being in recession, there are high chances of a decline in stocks, not only the stocks of the startups and technology companies but also the companies that focus on selling staple goods.

The premise of the Business Editorial

The article's premise is that the stocks of the large food manufacturing companies like Walmart have remained shaky, and these dangerous conditions have led to increases in uncertainties not seen in the previous years.

Supporting evidence for the premise that the stocks of food manufacturing companies have experienced a sharp decline

There was a disruption in the supply chain activities of most companies. The 2020 world economic crisis fueled by the COVID-19 pandemic was more challenging and complex than the 2008 financial crisis. Companies found increasing difficulties when trying to access markets for goods, specifically in agriculture. Therefore, even the companies that sell the staple consumer goods had disruptions in their supply chains (Hatmanu & Cautisanu, 2021). Wal-Mart and Target continued to absorb the higher freight costs and merchandising costs. Evidence from news reports suggests that the companies were compelled to acquire the needed supplies at an exorbitant price when previously they had some leverage over the suppliers.

The rise in recession risk also increases the uncertainty of investors. The Mutual Fund Asset Management procedure has become complex, and the asset managers also complain that the officers have become a bit too hawkish. The weakening economy makes the investors pessimistic because they are unsure about the direction in which the economy will pick up.

Evidence presented in the article regarding the decline in the stocks of the companies points to the following key issues: In the third week of May 2022, Target's shares fell by 29%, Walmart's shares declined by 19%, and Kohl’s shares dropped by 19% (Langley, 2022). The banks responded by increasing the interest rates. However, the interest rates increase did not help boost the investors’ confidence. One of the officials of the Federal Reserve of the United States of America stated that increasing the interest rates was one of the crucial strategies adopted by the institutions to stabilize the prices. However, the negative effect of this increase is that it will lead to slow economic growth.

An article in the ProQuest Database shows evidence that it is not only the Wall-Mart America that experienced a decline in share trading. Wal-Mart is Mexico's largest retailer by market capitalization. However, for the three consecutive days of May 21st, 22nd, and 23rd, the company experienced declined stock trading (Walmart, 2022). The shares fell by 4.3%. There was also an increase in market volatility during this period. The average daily volatility remained high at 2.5% compared to the previous periods when it was less volatile.

Campbell Foods and Hormel Foods Limited continued to experience a decline in sales, profits, and supplies, impacting their ability to supply the customer needs. The two firms could not provide the required supplies to convenience stores because of the supply chain disruptions. Access to labor remained an issue; hence, the companies did not satisfy consumer needs (Maras, 2022). These two factors (labor challenges and supply chain issues) could have contributed to the slow recovery and hence the further decline in stock prices.

After relatively low international food prices worldwide, there has been a growing trend in the market where the cost of foods has increased. The rise in food prices influences the share prices because of the low consumption levels occasioned by consumers wanting to look the other way and try to get food from other producers (Voklswirt, 2015). In 2022, the growing unrest occasioned by the War in Ukraine, and the rise in commodity prices, specifical oil, has created a ripple effect in the food sector. Exporting countries generate revenue from food production and get other items they do not produce, such as access to oil deposits. However, with disruptions in the supply chain and the continued rise in oil prices worldwide, it becomes difficult for food manufacturing companies to access the supplies at the right price and at the right time. The volatility in world prices also makes it a complex task for the investors to try and predict the income of the consumers. Therefore, it will not be easy for the company to plan its revenue earnings in the long run, creating a series of uncertainty for the investors.

Supporting evidence for the counter-argument that the stocks of the manufacturing companies that sell consumer goods have remained strong despite the pandemic

At, another argument states that the food and beverage companies attract investors because they pay many dividends (Gobanking, 2022). Companies that pay many dividends do so because of the high level of revenue that these companies receive. This has been even more important during the pandemic because the investors will run to invest in stocks that are more stable rather than putting their money in investments that lack stability.

The food and manufacturing companies had the highest ratios of companies that were reporting positive first-quarter results. These positive first-quarter results translate to potentially better-quality stocks and better shareholder returns. According to analysts, the French Fries companies and Daniel Moors were some of the companies that reported positive earnings.

The reason for this positive performance is that the large manufacturing companies in the food and beverage sector often do well because consumers are not redirecting their earnings to goods that are considered luxury goods. For example, during times of uncertainty, people will prefer the physical purchase of groceries to prepare the food instead of eating out in restaurants.


For a long time, the stocks of the food manufacturing companies have experienced periods of relative stability as far as revenue and return to the shareholders are concerned. However, with the current financial crisis and inflation that has rocked the world during the first half of 2022, the analysts foresee a period when the stocks fail being a sure bet. The volatility of the stores is starting to mirror the decline that has been experienced in the technology sector. Therefore, investors need to exercise caution when dealing with these stocks because the Federal Reserve has also exercised its powers and raised the interest rates.


Gobanking (2022, May 10). Food for Thought: Why Investing in These Consumer Staples Is Smart Even as Inflation Persists. GOBankingRates.

Hatmanu, M., & Cautisanu, C. (2021). The Impact of COVID-19 Pandemic on Stock Market: Evidence from Romania. International Journal of Environmental Research and Public Health, 18(17), 9315.

Langley, G. B. and K. (2022, May 20). Recession Trade Is On as Market Pain Spreads Beyond Tech. Wall Street Journal.

Maras, E. (2022, Mar 21). Following COVID-19: How coronavirus pandemic is impacting

convenience services. Vending Times, Retrieved from https://www-proquest-

Voklswirt. (2015). Food price volatility: the role of stocks and trade.

Walmart. (2022). Tuesday, May 24, 2022, Wal-Mart de Mexico (WALMEX: - ProQuest.

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