Unloved Consumer Names Like Walmart and Nike Face Pressure as Rate Hike Draws Near

Unloved Consumer Names Like Walmart and Nike Face Pressure as Rate Hike Draws Near

Joel Leon and Emily Forgash

Wed, September 16, 2026 at 4:46 PM GMT+3 4 min read

(Bloomberg) -- Stocks that are most closely tied to the health of the US consumer have trailed the broader market badly this year. A potential Federal Reserve interest-rate hike Wednesday may add to the segment's stress.

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The S&P 500 Consumer Discretionary Index, home to names like Walmart Inc., McDonald's Corp. and Target Corp., has dropped 5.2% in 2026, compared with an 11% advance in the broader equities gauge.

Inflationary pressures show no signs of easing, real wage growth is subdued, and shoppers are stuck absorbing rising costs associated with shipping and production. And while data on Wednesday showed consumers have largely brushed off the risks, the setup for stocks in the sector looks fragile going into the Fed's decision.

A hike would tighten "the cost of capital for the consumer-facing companies already absorbing cost pressure," Dean Curnutt, chief executive officer and founder of Macro Risk Advisors, wrote in a note to clients. It does "nothing to change the dynamic generating that pressure."

Signs of the pressure are easy to find. More than a quarter of stocks in the consumer discretionary index are trading at their 52-week lows, a dynamic last seen in April 2025 when President Donald Trump unleashed his global tariff agenda.

Strategists at firms including UBS Group AG and Truist Advisory Services advise clients to be more selective in choosing the stocks they want to own in the sector. UBS analysts led by Michael Lasser highlight the likes of Coca-Cola Co., Life Time Group Holdings Inc. and Aritzia Inc. among the preferred plays. They remain "relatively cautious" on the overall group.

To Keith Lerner, chief investment officer and chief investment strategist at Truist, stocks that provide travel experiences and cater to higher-end consumers are the relative winners in the sector. He's less optimistic about home-related companies and low-end retailers.

"It's not a broad based sector that has strength right now," he said.

Persistent Inflation

The view is broadly shared on Wall Street, and persistent inflationary risks amid surging energy costs have a lot to do with this skepticism. The consumer price index, excluding food and energy, climbed 0.3% in August, according to Bureau of Labor Statistics, exceeding the median estimate of 0.2% from a Bloomberg survey.

Massive artificial intelligence investments are expected to contribute roughly 0.4 percentage points to annual inflation this year, data compiled by CIBC Capital Markets show.

With AI-related spending unlikely to subside in the next two years, a bulk of economic slowing needed to reduce price pressures will need to come from shoppers, Dennis DeBusschere, chief market strategist at 22V Research, said on Monday. That means consumer stocks will remain under pressure as the Fed hikes rates, he said.

"The consumer service sector should feel it most," DeBusschere said while discussing the impact of a potential rate hike on equities. "The pain will last until core inflation starts moving toward the Fed's 2% target," he added, noting the first quarter "should be a better backdrop for consumer names."

Potential Turnaround

However, there are signs of life emerging in the sector. The $21 billion State Street Consumer Discretionary Select Sector SPDR exchange-traded fund saw a $495 million inflow in August, the biggest this year. And official data on Wednesday showed retail sales rose by the most in five months, signaling consumers continued to spend despite rising energy prices.

Read: US Retail Sales Rebound More Than Expected in Broad Advance

Christopher Harvey, head of equity and portfolio strategy at CIBC, noted that a lot of the pain from an interest-rate hike is already priced in the markets. And while the housing market along with other areas — such as gas stations and convenience stores — face pressure, the health of the economy remains solid.

"If you listen to some of the retailers, they are saying that the lower end is being value conscious, but that's at the margin, it sounds a little bit more difficult, but it doesn't sound terrible," Harvey said in an interview.

The likelihood is that Fed Chair Kevin Warsh will raise rates by 25 basis points, and that's something the consumer is "really not going to feel," Harvey said.

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