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Best Buy (BBY) is a favorite stock of mine as a window into consumer spending because it sells discretionary items. Almost all of its sales come from computing, mobile phones, electronics, and appliances. Its 2Q22 earnings report Tuesday morning clearly shows that consumers are tightening up. Comps declined 12.1% year over year resulting in a 48% decrease in EPS – and they guided 3Q22 to be more of the same.

While the market is fixated on Fed hawkishness in the wake of Powell’s Jackson Hole Speech all the tightening the Fed has already done is starting to choke off economic growth. While I don’t know whether the Fed will hike 75 points or 50 in September my best guess is that they will have to take their foot off the gas soon enough as it becomes apparent over the next few months that the economy is rolling over into recession.

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