Consumer Spending Trends: Insights from Morgan Stanley's Simeon Gutman

Consumer Spending Stability and Volatility

• 💡 Overall consumer trends are described as relatively stable, despite a lumpy and bifurcated year in 2025.
• ⚠️ Factors like government shutdowns, SNAP delays, and lapping tough weather comparisons have created some bumps, particularly noted in October's data.
• 📈 Spending has been concentrated in summer months, with a subsequent slight decrease.

Impact of Higher Prices on Spending Habits

• 🛒 Consumers are making trade-offs, buying fewer units to account for higher prices, especially in consumable categories like groceries and dollar stores.
• 📊 The total spend remains stable because price inflation is offsetting the decrease in units purchased.
• 🏠 Categories like home furnishings and consumer electronics are noted as healthy, while the broader home category is described as choppy.

Consumer Awareness of Tariffs

• 📌 A 10-point jump in consumer intention to spend with tariffs in mind was observed in Morgan Stanley's consumer poll survey, a level not seen since April.
• 📅 Tariffs are expected to impact pricing in the coming months, running through retail and affecting costs into early next year.

Recommended Retail Stocks

• 🎯 Walmart is highlighted for its increasing market share and improving profit margins, benefiting from a new flywheel strategy.
• 💰 Costco is favored as a durable compounder, showing stability and appealing to higher-income consumers less affected by economic stretch.
• 🏡 For home improvement, both Home Depot and similar companies are seen as interesting plays, with demand expected to rebound as mortgage rates potentially become more favorable.