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Investing.com - U.S. consumers are "well positioned to spend heartily" this holiday shopping season, although some investors are concerned households may not be so willing to open their wallets, according to analysts at Yardeni Research.
In a note, the analysts including Jackie Doherty flagged that the S&P 500 Consumer Discretionary index, which focuses on stocks in the sector, has inched up only marginally so far this year, making it the third worst performing segment in the broad S&P 500 benchmark.
Partly hurting the sector has been underperformance in home improvement names like Lowe’s and Home Depot, which have been hit by tepid house buying activity and many homeowners on low-interest-rate mortgages being unwilling to move, they added.
A combination of sweeping U.S. tariffs and sticky inflation have also made products more expensive, casting doubts over whether Americans will be ready and able to shell out cash on big-budget items during the typical year-end shopping spree, the analysts argued.
"Some investors are concerned that they won’t," even though consumers are in a "relatively strong position," they said.
"They’re largely employed, not overleveraged, benefiting from a three-year bull market, and expecting larger tax returns next year thanks to President [Donald] Trump’s One Big Beautiful Bill Act," the analysts wrote, referring to the White House’s signature budget bill passed earlier this year.
Solid returns from big-box retailer Walmart and wider apparel stores in the S&P 500 are more indicative of "consumers’ strength" as well, they said.
Still, weaker-than-expected retail sales data and a gloomy survey of shoppers’ confidence, both released on Tuesday, have painted a somewhat gloomy picture ahead of the Thanksgiving holiday.
Yet, the analysts said, the retail sales figures dated back to September, when a federal government shutdown that only just finished this month was looming. The consumer confidence index, meanwhile, "has not been an accurate harbinger of stock market direction in recent years," they said.
"It’s been a watch-what-consumers-do-not-what-they-say kind of market," the analysts said.