2025 Might Feel Lost, but Next Year Looks Brighter

Target (TGT) reported its third-quarter earnings yesterday.

They weren’t good.

The retailer did beat profit expectations. But sales from stores open 13 months or more fell 2.7% year over year – the third such decline in a row – instead of the projected negative 2.1%.

Plus, Target no longer expects to make $7 to $9 in adjusted earnings next year. It dropped that top number down to $8, and incoming CEO Michael Fiddelke chose not to comment about when he expects brighter days.

This has all generated a lot of speculation over how bad the upcoming holiday season could be. Is it a sign of more bad news to come?

The answer is no, but that doesn’t mean the bigger economic picture is bright.

Concerning Target specifically, the company has been a mess for the past three – almost four – years straight. So I wouldn’t use it as a bellwether of anything.

After all, its biggest competitor, Walmart (WMT), reported earnings this morning. And its results were very different. Not only did it beat forecasts for both sales and profits, but it also raised its full-year guidance.

With that said, one of the biggest reasons Walmart is winning is because it realized early on how much consumers were struggling post-pandemic. It made a concerted effort to market itself, not just to blue-collar and working-class customers, but to middle- and upper-middle-class shoppers as well.

In so doing, it deliberately and effectively stole from Target’s customer base.

Many of those people aren’t coming back anytime soon. After all, they’re now used to Walmart and its everyday low prices.

And it’s not like life has gotten any less expensive…

But while I don’t put much stock in Target’s quarterly report, that doesn’t mean I expect much good from the larger retail sector – or the economy in general – as this year winds down.

The Short and the Long (Term) of It

It’s only November, but it’s almost time to start taking stock of the year. And I’ll be the first person to admit that life is still too expensive in 2025.

While the inflation rate has come down compared with the past few years, it’s not down nearly enough. Besides, that’s the inflation “rate,” not inflation itself. Prices on most goods and services are still rising… albeit at a slightly slower pace.

The jobs situation isn’t much better, we know.

For all the efficiency artificial intelligence (“AI”) is giving businesses, it’s hurting an ever-increasing number of individuals. People are losing their jobs to AI, and recent grads simply aren’t getting work to begin with.

The college-to-career pipeline is clogged by advancing technology. Too many of those newly minted and very pricey degrees have been rendered all but worthless.

For instance, this chart got a lot of play a few weeks ago. It tracks the S&P 500 against job openings in a world of AI.

Source: Kalshi

A grain of salt is probably warranted. If I had to guess, I’d say some of the decline in job openings is probably explained by the fact that companies massively overhired during the stimulus-fueled pandemic years. But I’m also sure the introduction of AI is a contributing factor as well. I’m genuinely not sure what there is to be done about that.

So, that’s the bad news. But it’s not all bad.

2026 Should Be Better

For instance, did you know that U.S. manufacturing and industrial production is increasing? Probably not. That kind of detail is easily swallowed up in all the bad news.

Factory orders in August rose to $612 billion, according to a recent Census Bureau report. (Those figures should have been released in October but were delayed due to the shutdowns.)

That 1.4% monthly increase adds into a 3.3% year-to-date growth – which is pretty good for a country that has been outsourcing everything for decades. And considering the Made-in-America details below, I’d say it’s exceptionally indicative of what’s still to come.

I’ve written multiple times about all the deals and projects President Trump has been encouraging into the U.S. One of my last articles on this topic was in late July, when I quoted his Truth Social post about how:

Japan will invest, at my direction, $550 Billion… into the United States, which will receive 90% of the Profits. This Deal will create Hundreds of Thousands of Jobs – There has never been anything like it…

Meanwhile, Saudi Arabia, which had already pledged hundreds of billions in investment dollars back in May, just declared it would up that figure to $1 trillion. Now, it will take years to see where these investments actually land.

But it’s on top of trillions of previously announced pledges from foreign countries and international businesses alike, including:

• $600 billion from Apple (AAPL)
• $500 billion from Nvidia (NVDA)
• $500 billion from India
• $450 billion from South Korea
• $150 billion from IBM (IBM)
• $70 billion from Pfizer (PFE)
• $68 billion from Alphabet (GOOG)
• $57 billion from Johnson & Johnson (JNJ)

Meanwhile, there are other groundbreakings happening. In the energy sector, there are things like Woodside Energy’s $5.1 billion liquified natural gas (“LNG”) facility in Gregory, Texas… Cheniere Energy’s (LNG) $2.9 billion LNG facility in Gregory, Texas… and Kingston Energy’s $1.8 billion battery storage facility in Kingston, Tennessee.

Those are just the top three non-residential groundbreakings that happened in August – all of which will result in opened jobs positions even before they’re fully finished. The same applies to the $1.7 billion New York State Life Sciences Public Health laboratory that officially began in September, up in Albany, New York.

Johnson & Johnson, for the record, already broke ground on its new facility in North Carolina back in March. And IBM advanced its own pledges this month.

On top of all that, real estate in general looks to be turning a corner, as I shared earlier this week.

So, yes, 2025 has felt like a letdown in many ways. But let’s just get through the rest of this year. Because 2026 is looking like something we’ll all want to be a part of.

Regards,

Brad Thomas
Editor, Wide Moat Daily