After starting 2023 on a roll, US markets have had a horrible couple of months, and one industry is suffering the whiplash more than most.
Since the beginning of August, publicly traded casino owners and operators have seen a decline in the value of their shares, with some of those shares entering a bear market after falling more than 20%.
The two biggest loses were MGM Resorts, which owns and runs numerous sizable casinos, including the Bellagio and the MGM Grand, and Las Vegas Sands, the world’s largest gaming stock by total capitalization.
Only one of the ten largest gambling companies in the US has managed to post a profit in the second half of the year, and that company is the maker of slot machines Light & Wonder.
Over the past two months, casino stock prices have fallen so drastically that they are now lagging the S&P 500.
Investors’ concerns that the Federal Reserve will keep interest rates higher for longer in order to kill off inflation have caused the benchmark index to decline 8% since July 31. In contrast, the S&P Composite 1500 Casinos & Gaming Index, which tracks the value of 10 US-listed gambling stocks, has fallen 19% during the same time frame.
Analysts believe that Wall Street’s shift to a more pessimistic view of the economy is what has caused the decline in casino stocks.
Key data reports have recently given investors more cause to worry after the first seven months of the year were dreamy, with inflation increasing in August and the jobless rate beginning to creep up towards 4%.
Americans’ credit card debt is at an all-time high, an indication that many are struggling to make ends meet in the wake of years of price increases.
Because consumers are more inclined to utilise their limited resources to pay their rent or buy food than to gamble on roulette or blackjack in Las Vegas, the gambling business is sensitive to economic conditions.
Even renowned short-seller Jim Chanos has praised the Las Vegas Strip as a possible economic predictor, saying that there was a noticeable reduction in casino spending before to the dot-com meltdown and 2008 financial crisis.
According to a post he made on X, “Las Vegas Strip revenue has been a pretty good leading/coincidence indicator of the US Consumer,” and he included a table with annual revenue figures for the area’s well-known stretch of hotels and casinos. “Note the slowdowns in 2000 and 2007, before the last two recessions.”
The third-quarter earnings season, when most casino operators are anticipated to release their results during the following month, will be Las Vegas’ next major test.
Disappointing numbers may be only one of an increasing number of indicators that, like speculative stocks, the economy may be headed for a loss.