This week will see a rash of retail earnings. The most attention will no doubt be garnered by Walmart (WMT) and Target (TGT), who will report on Tuesday and Wednesday respectively. However, while their earnings are important in a lot of ways, they aren’t necessarily the best for understanding current and expected economic conditions. As interesting as Walmart and Target’s earnings will be, they won’t actually be that informative when it comes to the economy and the broader market.\nThe problem is that those numbers will be dependent more on their ability to deal with global supply chain problems in the short-term than they will be on U.S. consumer behavior. The issue for discount retailers revolves more around getting and distributing products than it does around actually selling them. Yes, that is a problem right now, but it is a problem that will eventually be cured by Adam Smith’s invisible hand. Price rises due to shortages will encourage more production and the market will increase supply at some point.\nOver the next year or more, what will decide the fate of Walmart, Target, and most other retail stores is the strength of the U.S. consumer, not their ability to get and distribute products. The future is less predictable but distinctly less encouraging right now than it is on the supply side. The Fed is actively trying to slow consumption and has said, in effect, that they are prepared to prompt a recession in order to do that.\nBy some measures, you could say that we are already in one, but with 3.5% unemployment, it doesn’t really feel like it. However, the Fed’s median forecast for unemployment is 4.1%, so they evidently expect their current policies to apply some recessionary pressure, and consumers look like to be getting squeezed before too long.\nWith supply side problems now, and possible demand side problems in the future, is anything in the retail space investable?\nYes, but it probably isn’t in the middle ground that companies like Walmart and Target occupy. History shows us that recessions tend to impact that area of retail more than any other. At the extremes, deep discount stores such as Dollar General (DG) and luxury good companies such as LVMH (LVMHF), the name behind brands such as Louis Vuitton, Moet and Chandon, and Tiffany, are less disrupted by tough times. If anything, the DG model works better in a recession than it does when people feel more secure with their finances, and the experiences of 2008\/9 and of 2020 showed us that rich people feel less economic pain than the rest of the country.\nIf choosing between high- and low-end retail stocks at the moment, two things would make me favor companies catering to the wealthy. The first is market positioning.\nDG, for example, is very close to all-time highs as investors have anticipated that relative strength in a recessionary environment, whereas LVMH stock is still a good twenty percent below its highs.\nThe second thing in favor of LVMH is that they are international. While it is true to some extent that if the U.S. sneezes, the world catches a cold, but when we are talking about the Fed’s actions, we are talking about a direct impact on the U.S. economy that may not spread beyond American borders. If anything, the other big influence on the luxury goods market, China, is moving in the opposite direction, with the central bank actually cutting rates today in response to weakness as a result of its zero Covid policy and the resultant lockdowns.\nThis week’s earnings from Walmart, Target, TJX Companies (TJX,) and others will be closely watched for signs of changing consumer behavior. In reality though, they will give only limited clues, given current supply problems. For investors, it is better to look beyond those problems at what will come next and concentrate on high-end sellers. The recession-proof nature of wealth, and less domestically-dependent sales profiles, will offer some protection to companies like LVMH if things do turn nasty. And if they don't turn nasty? LVMH stock still offers plenty of upside just to regain its previous highs.\nThe views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.