Could Struggling Las Vegas Casinos Predict Broader Economic Woes?

A new venue known as The Sphere promises to bring world-class entertainment to the Las Vegas Strip and Sin City has attracted sports teams to attract visitors for reasons other than adult-themed pastimes.

But it might take more than these improvements to sustain the city through an uncertain economic future.

Wall Street trends

The U.S. stock market has experienced a tumultuous year thus far in 2023 with various sectors experiencing some promising ups only to be knocked back by devastating downs.

Casinos make up a particularly influential group of stocks … and if the past is any indication, its downturn could spell big trouble for the economy in general.

Only one of the top 10 publicly traded gambling stocks has made any gains during the second half of the year. And that company — Light & Wonder, which makes slot machines — has only inched up a modest 0.5%.

Some stocks in the sector have entered a bear market since the beginning of August, shedding 20% or more of their respective values.

A reliable indicator

While it’s impossible to accurately forecast the future of the market, investor Jim Chanos explained: “Las Vegas Strip revenue has been a pretty good leading/coincident indicator of the US Consumer.”

Two notable examples included the selloff of casino stock in 2000 and 2007, both of which ushered in major recessions.

Elsewhere in the economy, however, things seem to be trucking along despite indications of a looming slowdown. Many Wall Street insiders are cautiously optimistic that the nation will avoid a crash landing as the Federal Reserve attempts to bring inflation under control.

But as third-quarter revenue results start to trickle in from the gambling sector, we might have a glimpse into what the rest of the market will look like in the near term.

Chris Agee October 9th, 2023

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