Walmart Recession Signal points to 'sharp economic downtown': Wall Street insider

Jim Paulsen, a veteran economist and former chief investment strategist for the Leuthold Group (a Minneapolis-based investment research company), is known for operating the Walmart Recession Signal. The WRS is used to measure the economy's well being, and according to Business Insider's Jennifer Sor, a recent WRS reading indicates that a recession is a strong possibility.

Sor, in an article published on March 30, notes that the WRS "measures Walmart's stock price against a basket of luxury stocks."

"The general idea is that the higher the gauge goes," Sor explains, "the more risk there is of a sharp economic downturn…. The WRS is the highest since the Global Financial Crisis nearly two decades ago…. The logic behind the recession signal is that, as the economy slows, more shoppers shift away from luxury businesses to budget retailers like Walmart. That means a rise in the Walmart Recession Signal could hint that a downturn or a 'significant economic slowdown' is on the way, Paulsen said of the indicator."

Sor continues, "Walmart, which has long served as a marker for U.S. consumer health, has crushed it in the past year, with its stock up 40 percent over the last 12 months. It's gotten a boost from consumers looking to save money as inflation worries have mounted."

According to Sor, Paulsen's WRS gave a danger signal before the last four economic downturns. And in 2026, the WRS has "climbed about 28 basis points, likely due to economic anxiety surrounding the Iran war," Sor reports.

Paulsen told Business Insider, "The WRS is increasingly advising caution about the U.S. economy. My guess is the economy avoids a recession this year, but I am becoming more convinced that a significant U.S. economic slowdown is unfolding. ... My guess is the WRS is pointing to a significant weakening in real economic activity, which could become more obvious during the next several months."