‘Dollar General’ Index Indicates Doom For US Poor

American financial markets are officially in a ‘correction’ period after yesterday’s sell-off took the S&P 500 10% lower than its record high, a trip that took less than a month. While the back-and-forth on tariffs is getting most of the blame, some retailers are sounding the alarm on the long-term effect that inflation is having on the most financially challenged sector of the market.

Dollar General, with its eye-glaring yellow and black signs, has taken the place of the mom-and-pop general store in many rural communities. As store owners retired or were no longer able to stock their stores, Dollar General’s deep pockets allowed it to put stores in communities where a stand-alone shop no longer makes sense. As a result, the company has a unique insight into the financial condition of poorer and more rural communities than what any Wall Street analysis is going to show. The verdict: America’s poor aren’t doing well at all.

“Their financial situation has worsened over the last year, as they have been negatively impacted by ongoing inflation,” CEO Todd Vasos told analysts on Thursday in an earnings call. “Many of our customers report that only have enough money for basic essentials, with some noting that they have had to sacrifice even on the necessities.”

The financial pinch goes beyond those who struggle below the poverty line. Dollar General, who reported 2024 fiscal year sales of more than $40 billion, notes that many higher-income families have turned to shopping at the discounter at well as high prices continue to pinch what were once considered ‘good’ incomes.

“Some of these negative dynamics will naturally correct as confidence and the economy pick back up,” commented Neil Saunders of GlobalData. “The unfortunate thing here is that this does not look like it will happen anytime soon.”

That recovery may be wishful thinking. The deeper worry among investors is that uncertainty around the effects of President Punk’s policies is causing consumers to spend less and discouraging businesses from investing. That reticence could, in turn, drive the economy into a downturn, forcing investors to reassess company valuations.

Discounting behemoth Walmart is painting a similar picture, saying that many of its customers are running out of money before the end of the month and making hard decisions at the checkout counter. Other large retailers, such as Kohl’s and Dick’s Sporting Goods are forecasting severely lower earnings for this quarter as customers are in a strong ‘survival mode’ mindset, buying only the absolute necessities.

“I think what markets are telling us is that they are very concerned about the potential for a recession,” said Kristina Hooper, chief global market strategist at Invesco. “That is certainly not what markets expected going into 2025.”

This raises the question of whether we could be looking at a genuine bear market, characterized by stock prices falling 20% off their high. The Russell 2000 has fallen 18 percent from its peak in November, close to a full-fledged bear market.

Sectors of the stock market exposed to tariffs, like food producers, have slumped. The effects are being felt by other companies, like retailers and airlines, that are worried about a pullback among consumers should the economy enter a downturn.

The administration, to no one’s surprise, is downplaying the whole thing. Treasury Secretary Scott Bessent said on Thursday that he was focused on the “real economy,” downplaying signals sent by business leaders and investors. “I’m not concerned about a little bit of volatility over three weeks,” he said. The disconnect between the administration and 99% of American households is palpable.

“The outlook for inflation depends more on tariffs, deportations, and DOGE than the backward-looking data releases right now,” Bill Adams, chief economist for Comerica Bank, said on Thursday.

Such statements indicate that the situation is likely to get worse before there’s any hope of it getting better. Short-term inflation fell last quarter and even a better-than-expected read on the Consumer Price Index wasn’t enough to push stocks into positive territory.

Some 36.5 million people are already living below the poverty line, according to both government and private tallies. As that number grows, pressure is placed on retailers, especially those dealing in everyday essentials, to lower prices. However, as tariffs continue to cause base costs to rise, stores have less margin with which to absorb the increase, making lower prices impossible. There is no winning in this scenario.

How long can the average family survive? With such a strong downturn in such a short period of time, the outlook isn’t good. While investment advisors typically recommend riding out short-term downturns in the market, forecasts have many looking at ways to protect critical investments such as 401Ks and pension funds. They’re not finding many alternatives.

When people can no longer afford to shop at Dollar General and Walmart, there’s little question that the economic plan of the White House is bad for Americans. With politicians of both parties being so horribly out of touch with reality, the only hope for improvement is for the American people to find their spines and fight back.