Retailers and restaurant stocks are having a tough year. The State Street Consumer Discretionary Select Sector SPDR exchange-traded fund, which has Tesla, Home Depot, and McDonald's among its top holdings, is down 2% so far in 2026. The reason is pretty clear. Higher oil and gas prices are making consumers nervous. Inflation hasn't gone away just yet. But the worst may soon be over.
"We've acknowledged that while consumer confidence/sentiment readings in survey data have been weak, there have been some signs of attempted stabilization," wrote Lori Calvasina, head of U.S. equity strategy research at RBC Capital Markets. She recently upgraded the consumer-discretionary sector to Market Perform from Underperform.
Others see consumer stocks bottoming out too. BTIG chief market technician Jonathan Krinsky said in a recent report that consumer stocks are "coiled" for a rebound, with the State Street SPDR S&P Retail ETF "poised to resolve to the upside." He sees the potential for the fund to run to about $100, up from current levels of about $88. It is up 4.5% this year.
The ETF is priced at less than 14 times earnings estimates for 2027. Among individual stocks, Krinsky said, recent price charts for Best Buy and Etsy look solid and that there are potential turnarounds in sight for Abercrombie & Fitch and Swiss sneaker company On Holding.
Krinsky also suggested that lower prices at the pump could lift restaurant stocks. He said the charts look constructive for Chipotle Mexican Grill, Starbucks, and Texas Roadhouse, which are all rated Buys by BTIG analyst Peter Saleh.
Concerns about the health of the consumer are unlikely to go away as long as inflation -- and a potential rebound in energy prices -- remain an issue, though. That's one reason why some experts are still saying that investors need to focus on companies that are benefiting from the so-called K-shaped economy, with more-affluent consumers doing the heavy lifting.
"The top part of the K is spending nicely thanks to the wealth effect from the stock market. But the bottom end is a little troublesome," said Tom Maher, manager of the Hilton Small-Mid-Cap Opportunity ETF. "The fundamentals are questionable." Along those lines, Maher said, the fund owns shares of Ralph Lauren, premium dog and cat food company Freshpet, and high-end cooler and drinkware maker Yeti Holdings.
Eric Clark, portfolio manager of the Alpha Brands Consumption Leaders ETF and chief investment officer at Accuvest Global Advisors, agrees that investors should be focusing on the upper end of the K.
"The U.S. is operating as two distinct consumer economies, requiring a very different investment approach than in a more uniform spending environment," Clark said. The fund owns Warby Parker, Ulta Beauty, Adidas, and DoorDash.
It could be time to put some consumer stocks in your shopping cart.
Write to Paul R. La Monica at paul.lamonica@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
July 16, 2026 01:30 ET (05:30 GMT)
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