The US consumer won't quit

The U.S. consumer remains resilient despite inflationary pressures, driven by a constructive employment backdrop adding 51,000 jobs monthly and a $7.2 trillion increase in household wealth during the first half of 2026. Priya Ohri-Gupta, head of U.S. high-grade research at Barclays, observes a "K-shaped" economic divergence where households earning over $100,000 drive 60% of expenditures, while those earning under $70,000 face significant constraints from high gasoline costs. Consumers are increasingly selective, trading down to private labels and prioritizing new products over essentials. While retailers currently act as a buffer against rising manufacturing costs, a meaningful uptick in consumer-facing inflation is projected for early 2027. Investment opportunities favor off-price retailers and brand owners with pricing power, while home furnishings may benefit from lower tariffs. Monitoring credit card utilization and holiday spending patterns will be critical for identifying potential shifts in this two-speed economy.