The Wesfarmers Ltd (ASX: WES) share price fell by 1.9% in September, and the S&P/ASX 200 Index (ASX: XJO) dropped by 3.5%.
So, while Wesfarmers did fall, it managed to outperform the wider benchmark.
There weren't any specific market-sensitive announcements made by the company, though there were a couple of things in the wider economic picture that may have affected the business' valuation (and the general ASX share market).
Market volatility
The market has been drifting lower as investors take into account the latest thoughts about which way interest rates may go.
The US interest rate is seen as key when it comes to valuing assets. Why? Warren Buffett once explained:
The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature…its intrinsic valuation is 100% sensitive to interest rates.
There are plenty of high-profile people who have suggested that the US Federal Reserve may increase interest rates again. Minneapolis Federal Reserve President Neel Kashkari has suggested that interest rates may need to go "meaningfully higher" from here.
In that environment, it's understandable why the global share market is looking uncertain and why ASX investors may be feeling a little less optimistic about Wesfarmers shares.
Australian inflation
There's also growing concern that official Australian inflation data may be about to accelerate in Australia. Fuel costs are rising, which could pass on inflation to a number of areas, both due to direct costs to logistics and transportation, as well as other costs that may be linked to the CPI inflation figure such as wages, rent and other services.
The return of El Nino could mean that food prices keep increasing, which would add to the picture.
Stronger inflation could mean households and businesses suffer, but Wesfarmers may be able to cope. Its businesses of Bunnings and Kmart are seen as leaders in offering great value, so they may be able to capture market share and use their scale to lessen the impact of inflation.
Wesfarmers share price valuation
According to Commsec, the Wesfarmers share price is now valued at 24 times FY24's estimated earnings.
