Amazon (AMZN) grabbed headlines this week, announcing it would raise its minimum wage to $15 per hour.
While the stock has slipped since the news – and pulled down the Consumer Discretionary sector down with it – Hedgeye Macro analyst Christian Drake notes that the announcement points to larger concerns in the Macro outlook:
Rising wages and narrowing margins.
“If the cost to make stuff – that’s wage growth – is rising faster than the price you can sell that stuff – that’s your broader inflation, that equals a margin squeeze,” Drake explains in the clip above.
“We’re at peak margins, wage inflation is picking up, we’re facing a Quad 4 environment [growth and inflation slowing] and we’re also facing impossible growth comps as we move into and through 2019.”
In other words, the Amazon news could be another sign of how late in the cycle the economy is getting.
Watch the clip above for more.