Wall Street is betting against the US consumer as tariffs escalate
Consumer discretionary is the worst-performing S&P 500 sector ETF in a no-good day for stocks.
As the S&P 500 approaches a correction, consumer discretionary is the worst-performing sector ETF in the index, a sign that investors think you’ll have less disposable income to buy new gadgets or go on vacation.
Markets continued to slide on Thursday as investors are overcome with uncertainty over President Trump’s threats to impose tariffs, which in almost all cases have been met with counterthreats. Tariffs raise costs for businesses, which usually attempt to pass that cost on to consumers in the form of higher prices, and lately consumers have been feeling gloomier. The alternative? Higher input costs and an inability to raise prices too much in the face of cash-strapped consumers is a recipe for margins to be squeezed.
Restaurant stocks are taking a big hit, with Chili’s owner Brinker International, slop bowl seller Cava, and NYC burger staple Shake Shack each down more than 5%, as are many of their peers. Several fast-food stocks, like McDonald’s and Wendy’s, are notably flat.
Live Nation, the dominant concert ticket dealer in the US, is down more than 7%. (I would compare it to its peers but it doesn’t really have any.)
Travel stocks are also sinking despite having had a stellar final quarter of 2024. United Airlines, Delta Air Lines, and American Airlines are each down. Southwest Airlines is notably still rallying as Wall Street celebrated its introduction of bag fees as well as fresh guidance saying its first-quarter fuel costs will be lower. Cruise lines like Norwegian and Carnival continued sailing down. Travel platforms like Airbnb and Expedia also slid.
As my editor Nate Becker recently pointed out, a recent regulatory filing from Delta signaled that corporations may be spending less on travel, which is really bad news for the sector.
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