(Jan 8): Strategists across Wall Street are looking for new engines to power the bull market in American stocks, amid concerns about a slowdown in the artificial intelligence trade.
A group at Goldman Sachs Group Inc, led by Ben Snider, has landed on companies that benefit when middle class consumers ramp up spending. Snider’s team likes health care providers, materials producers and makers of essential consumer products. But they are especially bullish on companies that sell things that are “nice to have” rather than “need to have”.
That cohort includes stores that sell upscale clothing and accessories, household goods makers, tour operators and casinos. The Goldman team reasons that the US economy is set to accelerate, lifting profits at companies where growth is steady and margins are thin — a group that has been outperforming since October.
“Stocks exposed to middle income consumer spending are particularly attractive,” Snider’s team wrote in a Jan 6 note to investors. “Value will continue to outperform in early 2026. Middle income consumers will experience an acceleration in real income growth, which should translate into improved sales growth.”
The S&P Retail Select Industry Index, which includes the likes of Carmax Inc, Etsy Inc and Academy Sports & Outdoors Inc, is up 3.5% since the start of the year and 8.8% since the start of November, when the busy holiday shopping period began.
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The Goldman folks expect consumers to get a boost from fading headwind from President Donald Trump’s tariffs, a stabilising labour market and tax rebates from the administration’s major legislation last year.
The call comes as investors search for alternatives to the AI trade that has powered markets for the past three years, led by the Magnificent 7 tech giants.
Economists surveyed by Bloomberg expect the US economy to 2.1% this year, with a boost from consumer spending. That’s led investors into stocks that have trailed in recent years.
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“There is a repricing of economic growth higher,” said Charlie McElligott, cross asset macro strategist at Nomura Securities International Inc. If that happens, it bodes well for more traditional value sectors, he said.
“Last year you had massive dispersion, with 12 names doing all of the heavy lifting,” he said in an interview. “Now you are getting a broadening out of the rally.”
“You are seeing people start to rotate into the higher beta parts of the market,” he said, referring to a volatile cohort of the stock market, often closely tied to the fortunes of main street US consumers.
An early winner from a potential rotation has been Dick’s Sporting Goods Inc, the Coraopolis, Pennsylvania-based purveyor of golf clubs, football shoes and tennis rackets. Dick’s has had a strong start to 2026, with shares up 6.1% to US$210.08 in four trading days, after tumbling 13% last year.
On Tuesday, an options trader bet the stock would return toward a record high of US$250 per share — a level the retailer reached in early 2025. The position could make a maximum gain of US$3.5 million ($4.5 million) on a US$84,000 of premium spent, according to Chris Murphy, co-head of derivatives strategy at Susquehanna International Group.
Dick’s is part of a group of half a dozen shop chains flagged by Goldman as having exposure to growing middle class wealth, alongside Burlington Stores, Inc, Best Buy Co, Five Below Inc, Levi Strauss & Co and Gap Inc.
To be sure, brick and mortar retailers have struggled to compete with e-commerce behemoths like Amazon.com Inc. But given the stratospheric valuations of the largest tech and AI-driven companies, it seems that investors are looking more at other opportunities.
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And, at least at the start of 2026, it seems that value is where the bargains are.
“Growth stuff is a lot more expensive,” said McElligot.
Uploaded by Magessan Varatharaja
