---
title: "Will U.S. consumer stocks stage a comeback? As bad news is fully digested, the bottom-fishing moment for non-essential consumer goods is approaching"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/280175633.md"
description: "The U.S. consumer discretionary stock market has performed poorly, and SentimenTrader analysis suggests that now is a good opportunity for \"buying on dips.\" Over 50% of S&P 500 consumer discretionary stocks are down 20% from their 252-day high, and historical data shows that this situation typically leads to an average increase of about 14% over the following year. Despite ongoing pessimistic expectations regarding rising unemployment rates and soaring energy prices, once uncertainty eases, leading consumer discretionary stocks may rebound first. The overall consumer discretionary sector still needs triggers such as a drop in oil prices, improvement in interest rates, or stabilization of consumer confidence"
datetime: "2026-03-23T13:59:03.000Z"
locales:
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  - [en](https://longbridge.com/en/news/280175633.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/280175633.md)
---

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# Will U.S. consumer stocks stage a comeback? As bad news is fully digested, the bottom-fishing moment for non-essential consumer goods is approaching

Recently, the market performance of non-essential consumer stocks in the U.S. stock market has been so poor that it may now be an excellent "buy the dip" opportunity, according to analysts from SentimenTrader. In the S&P 500 non-essential consumer index, over 50% of stocks are trading at least 20% below their 252-day moving average peak. The analysis from this institution shows that such a situation typically leads to an average increase of about 14% in the following year; in the previous 28 occurrences of this situation, the index continued to rise in 23 instances.

The long-term selling pain in this sector—which includes restaurant operators, yoga pants manufacturers, and cosmetics retailers—reflects the market's pessimistic expectations due to the rising unemployment rate in the U.S. and the dual risks brought about by soaring energy prices since the outbreak of the Iran war: higher production costs and a continued decrease in consumer spending on non-essential goods. The ongoing market concerns regarding the labor market triggered by corporate layoffs since 2025 have not only failed to downgrade but have actually intensified over the past year.

The cyclical rotation that began in the fourth quarter of 2025 has not benefited both essential and non-essential consumer goods comprehensively, and in the recent global stock market pullback, the funds have more clearly flowed into energy, industrials, and cash/defensive sectors, rather than systematically returning to the non-essential consumer sector, which has long been undervalued during sell-offs as in the past.

Currently, it seems more suitable to position in non-essential consumer leaders that have pricing power, higher average transaction prices, strong balance sheets, and cater to high-income consumers; once uncertainty begins to ease, this sub-sector may become one of the earliest to rebound. As for the broad beta trend of the entire non-essential consumer sector, it still requires at least one real trigger—usually a drop in oil prices, an improvement in interest rate expectations, or stabilization in consumer confidence—before it resembles a high-probability bottom-fishing trade.

**Has the market overreacted?**

SentimenTrader researchers stated in a report sent to clients: "In a highly cyclical sector, the proportion of severely impacted stocks is continuously rising, highlighting that pessimism has reached its peak. At this juncture, the bearish macroeconomic narrative has been continuously digested by the market. For investors willing to enter when sentiment is thoroughly washed out, this constitutes a textbook asymmetric risk/reward scenario."

![1774274012(1).png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260323/1774274014939429.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

As shown in the above chart, the severely impacted market sentiment—the S&P 500 non-essential consumer sector is the worst-performing sector aside from financials. The data has been standardized, with the percentage increase indicating the rise since December 31, 2025.

The S&P 500 non-essential consumer index includes companies such as Lululemon Athletica Inc., Ulta Beauty Inc., and Wynn Resorts Inc Many fundamentally strong companies, including those in this sector, have fallen by 10% this year, more than double the decline of the large-cap benchmark S&P 500 index. This sector, composed of 48 constituent stocks, ranks second to last among the 11 sectors of the S&P 500, only better than the financial sector, which has continued to decline under the pessimistic narrative of "AI disrupting everything" and the private credit crisis.

Mark Hackett, Chief Market Strategist at Nationwide, stated that once uncertainty begins to ease, this sector could become one of the earliest market segments to rebound.

He said, "When investors shift to a wait-and-see approach or step back to wait for the market to bottom out, this sector will suffer psychologically. If the headwinds we face are essentially resolved, this sector will definitely be seen as a proxy for overall investor and consumer sentiment, and once the situation returns to normal, it will perform quite well shortly thereafter."

This bet is partly based on strong earnings growth or significant recovery expectations, underpinned by the robust resilience of the U.S. economy, particularly the spending of high-net-worth individuals, and the market's optimistic belief that the worst impacts of the global trade war initiated by President Donald Trump have passed.

Data compiled by Wall Street research firm Yardeni Research indicates that after a significant decline in profits for the first time in 12 quarters in the three months ending in December, profits in this sector are expected to recover growth in the first quarter.

However, veteran Wall Street strategist Hackett believes that the navigation of the entire sector is unlikely to be smooth sailing; he thinks there may be a divergence between the so-called "new economy" segments and more traditional non-essential consumer stocks. Hackett noted that online used car trading platform Carvana Co. and well-known food delivery service operator DoorDash Inc. may need some time to enter a rebound. Meanwhile, he added that if consumer sentiment rebounds significantly, well-known casino operator Las Vegas Sands Corp., cruise operator Carnival Corp., and stocks like Nike, Under Armour, and Dick's Sporting Goods could rebound quickly.

**Inflation Variables Are Crucial**

A crucial variable for this sector is whether energy prices will remain at historically high levels for a sufficiently long time, leading to a sustained rise in inflation that overshadows the positive impact of the tax refund season, which was originally expected to add cash to consumers' wallets, and whether inflation factors will keep U.S. benchmark interest rates high for a longer period. In fact, even before the outbreak of the Iran war, U.S. inflation unexpectedly accelerated in February.

Federal Reserve Chairman Jerome Powell stated last week that officials may not unanimously choose to cut interest rates until they see significant progress in reducing inflation. He also noted that recent inflation expectations have risen significantly in recent weeks, and part of the impact from oil price shocks will soon be reflected in U.S. core PCE inflation data.

The Federal Reserve maintained the benchmark interest rate unchanged on Wednesday as the market expected, but Chairman Jerome Powell clearly conveyed a hawkish stance during the press conference, emphasizing that the oil price shock makes the U.S. inflation outlook too uncertain to provide a timeline for easing Jerome Powell has repeatedly emphasized that the Federal Reserve may not return to a rate-cutting trajectory until inflation shows signs of cooling down again—this consideration does not even take into account the potential inflationary impacts of the Middle East conflict, stressing that it is still too early to assess the war's effects.

"What we really want to see this year, and it's very important, is progress on inflation," Powell stated at the press conference. "If we don't see that progress, then you won't see rate cuts."

The Federal Reserve chairman made these remarks after deciding to keep interest rates unchanged at two consecutive meetings. This statement reinforces the view that, due to consistently uncooperative consumer price data, the Fed is still quite far from resuming a series of rate cuts that began at the end of 2025. This sticky inflation trend has also raised the possibility that the Fed's next move could ultimately turn into a rate hike.

**A Triggering Factor Needed**

Even as the escalating tensions in the Middle East weigh on market sentiment, the National Retail Federation (NRF) still expects a significant rebound in retail sales in the first half of this year, with high-income households contributing most of the growth. According to an NRF forecast, retail sales are expected to grow by 4.4% this year, reaching $5.6 trillion, higher than the 3.6% annual sales growth rate over the past decade after excluding pandemic factors.

A clear recovery path for consumer stocks may not emerge until policymakers announce another rate cut. Bond market traders currently expect that the Fed will not cut rates at any level for the remainder of this year. On Friday, bond market traders even priced in a slightly higher than 50% probability that the Fed's potential next policy action in the second half of the year would be a rate hike rather than a cut, while the S&P 500 continued its longest weekly decline in a year. In contrast, last month, the bond market had priced in expectations for the Fed to cut rates 2-3 times, even pricing in the possibility of the Fed restarting its rate-cutting cycle as early as June.

Since the outbreak of the new round of geopolitical conflicts, the market has been under pressure testing. However, as Israel's bombings critically impact Iran's economy and significantly reduce Qatar's gas production capacity under the war's influence, this week marks an escalation in geopolitical tensions. Although Trump stated on social media that he is considering gradually "de-escalating" military actions against Iran, senior U.S. officials have indicated that the White House is sending hundreds of Marines to the Middle East while weighing a plan to send ground troops to seize Iran's oil export hub on Kharg Island.

Brent crude oil is hovering and gradually stabilizing around $110 per barrel, no longer just a brief spike in oil prices—indicating that high oil prices could be a persistent major threat that investors, central bank policymakers, and business leaders must confront. It is reported that Kharg Island is Iran's largest crude oil export base, with 90% of Iran's crude oil exported from here.

Gina Martin Adams, chief market strategist at HB Wealth Management, stated: "Traditionally, it often takes a very profound triggering factor in interest rates to turn the situation favorable for the global stock market's consumer discretionary sector." Martin Adams added: "Against the backdrop of significantly rising energy costs driving the inflation beast to return, discretionary consumption is unlikely to accelerate expansion. With increased energy spending and stagnant job growth, discretionary spending is unlikely to improve in the short term."

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