By Teresa Rivas
The pandemic was great for introverts, sourdough bread enthusiasts, and retail stocks. The One Big Beautiful Bill could provide the biggest boost to retail stocks since then, even if it leaves the wall flowers and baking enthusiasts out in the cold.
As awful as the pandemic was for just about everyone, it could be considered nirvana for retailers. With few entertainment options available, consumers, flush with cash from stimulus checks, were quick to spend the dough on stuff they didn't really need -- sneakers, designer handbags, flat-screen TVs, you name it. The State Street SPDR S&P Retail exchange-traded fund gained 42% in 2020 and 43% in 2021. Retail stocks collapsed in 2022, and they have been laggards ever since
The prospect of higher tax refunds, however, could provide the biggest boon for retailers since the pandemics -- though not necessarily for the Covid-era winners. Bank of America estimates that the OBBA will result in total tax refunds rising by roughly 18%, or some $65 billion compared with recent years, to a total of $425 billion. That is just over half of the $814 billion in total stimulus in 2020-2021, but still well above average. And if a tariff dividend comes to fruition -- Kalshi puts a 39% chance of that happening in 2026 -- it could mean an additional $2,000 for everyone with incomes below a certain threshold.
However, shoppers will have different priorities this time around. The stimulus in March 2021 was broad based and need blind; it benefited electronics, home furnishings, and clothing, writes BofA analyst Lorraine Hutchinson. This time, an increased State and Local Tax, or SALT, deduction will disproportionately benefit higher-income consumers, as they're more likely to pay property taxes, but they have remained strong spenders throughout, so no boost should be expected. The prospect of a cap on tariff dividend checks and the reduction of taxes on overtime and tips means more of the benefit will accrue to those with more modest incomes, and they will have to be more prudent due to inflation, reduction in SNAP benefits, and the government shutdown.
"This time, they will likely use the money on necessities and filling gaps elsewhere in their budgets," Hutchinson explains. "We doubt our coverage will experience the same level of outsized benefit this time around." She thinks Ollie's Bargain Outlet Holdings might be one big winner, given its focus on consumable and household goods.
With the essentials taken care of, history tells us Americans will next turn to clothes: During the last round of stimulus in spring 2021, check recipients increased their spending on apparel by nearly three-quarters compared with the week before, with athletic apparel and footwear among the most popular, as spending rose by half in this category. If history repeats. Hutchison's top picks should outperform. They include Ross Stores and Burlington Stores, a recent Barron's pick, along with long-troubled Nike, which could use a win after last week's disappointing earnings report.
After the winter solstice this past weekend, every day brings a little more sunlight. Come springtime -- and tax season -- the outlook for some retailers could be bright indeed.
Write to Teresa Rivas at teresa.rivas@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 23, 2025 03:30 ET (08:30 GMT)
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