I’d imagine that there is going to be some softening in the retail sector that the market hasn’t factored in yet. Most of what I’ve read suggests that in a recession it’s high end retailers that suffer. People will still buy toilet paper and deodarant from Target or Walmart (in fact, in a mild recession discount retailers may actually increase market share as more high end consumers feel a price pinch and “scale down” their spending). Places like Williams Sonoma and Restoration Hardware will likely see sales slumps.
“Survive” might be an overstatement. In theory recessions encourage efficiency, and while this is a bigger bubble than in the past, I don’t expect you’ll see too many retailers go under.
In general you should be cautious about any stock trading well above its book value. Sometimes there’s a good reason, so I guess you just have to go on a case by case basis.
