Bank of America (BofA) says one sector of the stock market could vastly outperform the rest if the Federal Reserve continues to cut interest rates.
In a new vision for 2026 meetingSavita Subramanian, BofA’s head of US Equity and Quantitative Research, says consumer staples companies, or lower-price retailers, will benefit greatly if the Fed continues to ease monetary policy.
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“From an industry perspective, I think if the Fed cuts and possibly stimulates consumption, it could actually offset some of the pain that this lower-income consumer is feeling.
So what we’ve found during periods of Fed cuts is that consumer staples companies, lower-price retailers, tend to outperform the market quite aggressively.
And that would be a big change from recent years, when consumer staples and food supplies suffered more from inflation. Lower-income consumers felt the sharper inflation in rent, utilities, insurance, food, and so on.”
Subramanian notes that the upcoming midterm elections may make policies more populist rather than trade-oriented.
“I also think that as we head into next year’s midterm elections, we could see friendlier, more populist policies instead of this year’s more trade-oriented, potentially inflationary policies.
So these could be really positive drivers for a comeback in that broader consumption story.”
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