Summary

• We are more bullish on the sector than we were a year ago, reflecting reduced recession risk and greater tariff visibility.
• The aggregate consumer picture is more supportive than it appears. Stabilizing inflation in key categories and relatively strong wage growth and employment underpin our constructive view.
• Higher-income consumers have an outsized impact on the sector-level figures, which creates a specific risk: a sustained equity market correction, potentially driven by an AI trade unwind, could trigger a meaningful wealth effect reversal.

By Mari Shor, CFA

A year ago, tariff uncertainty and recession risk dominated our outlook for the sector. Today, conditions are more constructive.

Consumer spending has proven more resilient than the macroeconomic backdrop would

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