Economic Fear Pummels Stocks Tied to Americans’ Spending

US Consumer Sentiment Falls to Two-Year Low as Trade Policies Raise Concerns

US Trade Policies Weigh on Economy, Consumer Discretionary Sector

President Donald Trump’s fickle trade policies are raising concerns about US economic stability, and the stocks most reliant on the strength of the American consumer are starting to feel the pinch.

Retailers, Airlines, and Restaurant Operators Suffer

From retailers to airlines to restaurant operators, corporations that count on discretionary spending are having an increasingly difficult time, which is weighing on their bottom lines. Investors are reacting, sending the S&P 500 Consumer Discretionary Index down for a fourth straight week. The sector is down 15 percent in the past month, almost double the decline in the broader S&P 500 Index.

Earnings Forecasts Disappoint, Outlook Cuts Accelerate Selloff

A slew of disappointing earnings forecasts from retailers sparked the recent rout, and outlook cuts by the biggest US airlines last week accelerated the selloff. Consumer companies have been contending with budget-conscious Americans pressured by years of elevated inflation. And now they’re facing uncertainty over the Trump administration’s policies around trade and government spending.

Consumer Sentiment at Two-Year Low

US consumer sentiment fell to a more than two-year low in a preliminary March reading of University of Michigan data issued on Friday (March 14), while long-term inflation expectations jumped by the most since 1993.

Experts Weigh In

"We and others accepted the consensus view that the Trump administration would be very pro-growth generally, and even if that benefited the highest income households the most, there would be a general lift," said Patrick Kaser, portfolio manager at Brandywine Global Investment Management. "Given that what we’ve seen out of Washington has been disruptive to stability, confidence and growth, absolutely our view has deteriorated on the security of the US consumer."

S&P Retail Select Industry Index Suffers Worst Week Since March 2023

The S&P Retail Select Industry Index suffered its worst week since March 2023 after earnings reports from Kohl’s and Dick’s Sporting Goods fueled worries about Americans’ spending power. Both retailers issued weaker-than-anticipated annual forecasts, following similar disappointments at Walmart, Best Buy, and Abercrombie & Fitch in the past month.

Conclusion

As the trade policies of the Trump administration continue to raise concerns about US economic stability, the stocks most reliant on the strength of the American consumer are starting to feel the pinch. With consumer sentiment at a two-year low and long-term inflation expectations on the rise, it is clear that the US consumer is facing a challenging environment. As a result, investors are advised to be cautious and consider diversifying their portfolios to mitigate the impact of any potential economic downturn.

FAQs

Q: What is the impact of Trump’s trade policies on the US economy?
A: Trump’s fickle trade policies are raising concerns about US economic stability.

Q: Which sectors are most affected by the trade policies?
A: Retailers, airlines, and restaurant operators are among the sectors most affected.

Q: What is the current state of consumer sentiment?
A: US consumer sentiment has fallen to a more than two-year low.

Q: How have earnings forecasts been affected by the trade policies?
A: A slew of disappointing earnings forecasts from retailers sparked the recent rout, and outlook cuts by the biggest US airlines last week accelerated the selloff.

Q: What is the impact on the S&P Retail Select Industry Index?
A: The S&P Retail Select Industry Index suffered its worst week since March 2023 after earnings reports from Kohl’s and Dick’s Sporting Goods fueled worries about Americans’ spending power.