3 in 3: Walmart’s Power Play, the Consumer Summer, and Russell Index Drift

America's biggest retailer is taking charge of its power needs. Cracks are starting to form at the edge of the consumer. And the latest Russell Index rebalance shows you may not be as balanced as you might have thought. I'm Jim Lydotes, and these are three ideas in three minutes. So let's flip over the timer and let's go. 

So first up, Walmart just signed a long-term purchase power Constellation to secure energy through 2045. This wasn't Microsoft. This wasn't Google. This wasn't Meta. This was Walmart. So for the last couple of years, the power story has centered really fully around the hyperscalers and AI. Now that conversation is solidly moving to Main Street. This matters because it suggests that the power bottleneck that everyone's been focused on for the last couple of years is more than an AI story. And if more non-tech companies start to lock up dependable energy like Walmart just did, then that could give another leg to the AI power trade. And we could see a lot of demand coming from outside of Silicon Valley. 

Second, with summer season getting underway, our Grassroots Research team recently checked back with 500 US consumers. what they found from their survey was that while consumers are still spending, the cushion is getting a little bit thinner. More than 40% of our respondents said credit card balances have increased over the last three months. About a third said that they are relying more on credit cards for everyday purchases than they were just a year ago. And most telling of all, was that if energy prices came down, nearly half the respondents said that they'd use the savings to pay down debt. So while lower energy prices at the pump may help households over the summer, don't assume that savings get put back into discretionary spending because that's not what we're getting from our respondents. 

So finally, the Russell indices rebalanced on June 26th. This one was a pretty big deal. So after the huge run-up that we saw in AI-related names, this year's rebalance produced some of the largest index composition changes that we've seen in a really long period of time. In the Russell 1000 growth index, semiconductors now make up nearly a third of the overall index. Five years ago, that was less than 7%. In the Russell 1000 Value index, the weight in tech stocks has jumped from under 9% five years ago to more than 20% today. And these issues are up and down in cap. In the Russell 2000 Growth index, biotech's weighting has tripled over the last four years, while the weighting in consumer staples has been cut in half. So, what this does is it underscores this idea that broad indices are not static. They can drift, and sometimes those drifts can be quite considerable. So you should use the rebalance as a reminder to look under the hood. Make sure your funds still play the role that you expect. Because after a year like this, there could be a bigger gap between what you think you own and what's actually in your portfolio. 

So those are our three ideas in three minutes with a little sand left in the bottle. Have a wonderful Fourth and we'll see you back here in a couple weeks. 

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